For most people, the mere thought of selling their house is unsettling, to put it mildly.  Even when everything goes smoothly, the process itself is overwhelming.  Hiring the right agent, decluttering from basement to attic, staging your home for open houses, finding a buyer who will make it through to closing; all of this and more can make for many a white-knuckle moment.  Given the opportunity, what seller wouldn’t at least consider options to reduce the stress and bring the matter to a quick, satisfying end?

One way some sellers try to achieve this end is to sell to close friends or family members.  At first glance this might seem like a great idea.  Unlike most real estate transactions, you already know the party on the other side.  Not only that, you have a close personal relationship and know that you can trust them to deal fairly and openly with you.  You also probably have a rough idea of their work history and financial stability.  In short, both parties start off knowing, liking, and trusting each other, confident that all involved can perform their end of the deal.  Classic win-win if ever there was one.

Undoubtedly, many friends and family real estate sales close just as the above best-case scenario outlines.

However, it would be a mistake to take such a rosy outcome for granted.  Just as in any deal, numerous circumstances can arise to complicate the situation.  And where friends and family are concerned, the consequences may go well beyond inconvenience, frustration, or even a financial setback.  They can include long-lasting hard feelings, perhaps permanently damaging—or ending–cherished relationships.

Keep in mind that even the most straightforward real estate transactions have a good chance of falling through for a number of reasons.  Buyers and sellers change their minds.  The parties can’t agree on inspection items.  The buyer fails to acquire a mortgage commitment.  A job change prevents one or both of parties from moving forward.  Unresolved title issues give the buyer cold feet.  And, of course, health issues may arise unexpectedly at any time.

You may think this only strengthens the case for dealing with friends and family.  After all, when you’re working with someone who you have known and trusted for a long time, you ought to feel better about avoiding at least some of these pitfalls.

All fine and good, if only it were the case.  For example, how certain are you that your old college roommate can get pre-approved, even for the reduced price you’re offering him?  He may talk a good game about his career and finances, but idle golf course chatter won’t carry the day; he will have to provide proof.  What if he can’t?  Now, not only have you wasted your time with him, he has revealed something about himself to you that could be embarrassing to him.  How will that affect your friendship going forward?

The truth is, you probably don’t know nearly as much about your friends and family members as you think.  Do you really believe they tell you everything about all the challenges in their lives?  How forthcoming are you about your job, money, health, or marital problems?  Human nature tends to make people downplay negative issues and put their best foot forward instead.  However innocent, this could lead to misunderstandings that can derail a real estate transaction.

When they do, resentments will likely follow.  Imagine you had you put your house up for sale, and, at the request of your nephew and his wife, took it off the market to sell it to them.  Naturally, you significantly reduce your asking price, happy to take the hit to help out a beloved family member and ensure a trouble-free sale.  If the deal collapses, you will have to put it back on market with the days on market increasing.  Good luck getting your original asking price the second time around.  How will each side address this episode in this year’s Holiday letter?  And what tidal waves will these ripples produce among your other family members?  Do you really even want to think about it?

The family/friend transaction can succeed for both sides provided they level with one another.  Both parties must recognize the risks they are taking and the danger posed to their future relations if the deal does not proceed as planned.


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