Should I sell a house for a family member?

Question

Hello,

I just got my real estate license two weeks ago, and my mother is interested in selling her house in the near future. What should I be aware of if I am selling a house for a family member? I plan on giving her all my commissions, and my broker is giving her his commission as well. A couple of things to note however are that I have never sold or bought a house before, and my broker has never sold a house before. Although he has bought a few for other people. I doubt I will have any difficulties selling the house due to the condition, area, and the current market, I am mostly concerned with any chance of legal risk, or somehow damaging our relationship by messing something up terribly. Even if I somehow sold the house for 50k less than what an experienced agent could sell it for, I would still be saving her money with the commissions. If anyone has any experience with this or any thoughts in general I'd appreciate your input. Thank you!

Best,

Kyle

Charlie MacPherson · Answer

@Kyle Marsh  MASSIVE RED FLAG - your broker has never sold a house before???

I don't know how that's possible, but if it is, that means that you're both doing this by braille.  You cannot possibly give Mom proper representation.

You need experience in how to handle the paperwork.  Title V (septic - if applicable), lead paint, property disclosure (optional in Mass) - but even more important, do either of you have any experience in negotiating deals?

I worry that a sharp buyer's agent will use an inspection as an excuse to walk all over you.  He'll demand discounts, repairs or other concessions that will sound reasonable, but can be refused.  Will you know which to refuse?  Which to push back on?  Which to negotiate to a middle position?

Do you know how to handle multiple offers?  How to work with escalation clauses?  Heck, do you even know how to run an open house?

This "blind leading the blind" thing has disaster written all over it.

First, as a brand new agent, you need guidance from your broker.  It doesn't sound like you're in any kind of position to get it.  Unless there's some weird twist to the relationship, I'd strongly recommend finding a new brokerage.

Second, I'd find the sharpest agent you can and refer Mom's listing to him.  Ask for 30% referral fee and ask that you can look over his shoulder for the learning experience.

Do the right thing for Mom.  Good luck!

De Rasche · Answer

You get paid a commission then it is income to you.  If you then give commission to her, you still owe taxes so hoping you are meaning not charging any commission.

You still will need to put on the listing you are related and on a contract disclose that, but check with your state rules.  No problem if you do.

Do the comps for her as you would anyone else or

Mom can interview other agents along with you, as they will give what they will list for.  Then she has confirmation from others and good for you to interview to get ready for the next one.

Constantino Capobianco · Answer

I see why you would be open to lowering commissions being it's your mother. Your broker is ok with that as well? I would recommend maybe not forfeiting your entire cut because to properly market the property and get it sold for top dollar you will have some marketing expenses. Maybe see if she is interested in reduced commission. Family is first but it still is your career and maybe even a 1% commission could help boost you in the right direction. If she doesn't like the idea of even a 1% commission for each you and her broker, make her aware that you two though new, are professionals in your field and could negotiate better than her especially in this market to make up far more than that 1%.

Travis Wylie · Answer

Keep in mind FSBO's are now licensed, but you are, and will be held to a higher standard.  If you do sell your mom's house, when in doubt...disclose, disclose, disclose.  I'm curious, what was your reasoning for choosing your broker that you did if they never sold a house?

Charlie MacPherson · Answer

@Kyle Marsh  Good question.  FSBOs like to brag that they did the sale themselves, but the questions - especially for those with little or no experience - are:

Whether they left money on the table because they're weak negotiators or didn't understand how to create a bidding war.  In order to do that, there's a correct day to list on MLS.  There's correct timing for the open house.  There's a correct deadline for offers.  There's a correct response to multiple offers.

Whether they incurred additional risk because they failed to disclose certain items.  That's lawsuit bait.

Whether they took an offer without knowing how to vet a buyer and their pre-approval. HINT: many lenders will give you a PA without examining your supporting docs.  Those are garbage.  Think Rocket Mortgage and their claim of "we can pre-approve you in 7 minutes".  And those will tie your sale up for weeks, only to fall apart because the review of the buyer's income and debts are not what they claimed on the phone.

I could probably write a book on all this, but that should give you an idea.

Kyle Marsh · Answer

Good points, my original assumption is that just by placing this house on the MLS will do 90% of the marketing needed. It's a fantastic move-in-ready single-family located twenty minutes south of Boston. In this market, I couldn't imagine that a properly marketed open house wouldn't generate the buyer needed. But once again, this is my inexperience speaking. But that's also a good point about the marketing expenses, we should account for that.

Kyle Marsh · Answer

All fantastic points. Just playing devil's advocate, if it's that big of a risk, then why do so many people do for sale by owner? How are they able to handle all of those problems?

Should I sell a house for a family member?

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