There are all kinds of reasons to sell a home to a relative: to keep a beloved property in the family; bestow a gift to someone in the form of real estate; or even execute a fair market sale without as much legwork. To ensure your keeping-it-in-the-family transaction goes off without a hitch, be crystal-clear about your goals and intentions and diligent about covering your bases. Here are some tips for navigating this situation.

Can I sell my home to a family member?

There are no legal limitations around selling a home to a family member, nor around pricing the home when one relative sells real estate to another.

“You can set your price however you’d like in a real estate deal,” says John Gould, a real estate agent with William Raveis Real Estate in Connecticut. “Theoretically, you can sell what you own for as much or as little as you’d like.”

If you’re selling a property to a relative at fair market value and they’ll be financing the purchase with a mortgage, bear in mind that the lender might take an extra-close look at the details of the sale to ensure everything is above board.

On the lower end, you can opt to sell your property for as little as $1, or even gift the parcel entirely, without any restrictions. However, you need to make sure that whatever your deal is, you make it right with Uncle Sam (more on that below).

Also, be aware that if you sell a property to a family member for below market value, you might want to have the sale denoted as such in the public records — if it’s not, the below-market price could bring down the future sale prices of other houses in the area.

What’s different when selling to a relative?

It depends on the type of sale. A fair market sale will bear the tax liabilities of a normal real estate transaction, for example, but if you’re selling the property for below market value or fully gifting it, there are different tax implications.

For tax year 2022, an individual can gift $16,000 to another individual without triggering the gift tax. Anything above this amount needs to be reported to the IRS. However, an individual can also gift up to $12.06 million tax-free across his or her lifetime, so if a gift exceeds the annual allowable $16,000, the overage still needs to be reported to the IRS, but you’ll only pay taxes on it if the combined total of gifts in your lifetime is higher than the lifetime limit. When it comes to selling your home below market value to a family member, the “gift” is the equity. In fact, the term for this is “gift of equity,” and if it exceeds $16,000, this is what must be reported to the IRS.

In contrast, if you gift your home entirely to a relative, then they’ll need to be extra-aware of the tax implications, because in this situation, the cost basis of the house is not “stepped up” — the value remains your original purchase price, plus the cost of any improvements. If your relative were to later sell the property, they’d be liable for capital gains tax on the difference between the price for which they’re selling the property and the price for which you originally purchased the property. (Given the circumstances, this could be substantial.)

Do you need a real estate agent?

For the sake of family harmony — and your own financial and mental sanity — avoid cutting corners. You might think you don’t need a real estate agent, but it’s worth at least consulting with one for a comparative market analysis, or CMA. Even if you’ve already decided you’re selling your property for below market value, a CMA is an excellent tool for baselining the home’s fair market value for the IRS. In this situation, try to negotiate a lower commission, since you won’t need all your agent’s services.

Ditto when it comes to lawyers: You’ll need someone to help you with the contract. Do not try to go this alone — in fact, it might be best for you and your relative to engage different lawyers rather than use the same one. That way, you’ll each have someone advocating for your best interests, and any potentially thorny issues can be worked out between your respective lawyers.

Hiring an appraiser is another way to document the property’s value for the IRS. If the transaction is being financed with a mortgage, the lender will require a professional appraisal, anyway, to ensure that the size of the loan doesn’t exceed the value of the property.

Likewise, don’t skip out on an inspection before the sale goes through. Even if your family member knows all the home’s nooks and crannies, inspectors have specialized knowledge so they’ll flag any issues your relative might not even be aware of, and make valuable repair recommendations. At the very least, you’ll have a documented inspection report to refer to in the future.

In some cases, you might need to hire professionals to comply with state-specific requirements.

“In certain places, things like disclosures around lead paint are necessary before any sale can be completed,” says Gould.