Can You Sell a House for a Dollar?

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You can sell your home for any listing price that you think is fair, including as low as $1.

While most homeowners aim to maximize their property’s value, there are specific cases where transferring a property for only a dollar makes sense, such as when parents sell properties to their kids or one partner exchanges ownership to another.​

There are some technicalities of a one-dollar home sale that you need to be aware of. In this article, we’ll share your options, tax implications, and the buying process of selling your home for such a low price. 

Thinking of selling your home for $1? Get guidance from FastExpert real estate professionals who can advise if this strategy makes sense for your situation.

Benefits of Selling a House for a Dollar

If an aging parent is entering an assisted living facility, they need to move out of the family home. Instead of keeping the property in their name, they can sell it to their child, who will assume ownership of it. The child can continue to live in the property until they are ready to sell it. 

Additionally, married couples sometimes sell their properties to each other for a dollar. If a couple is divorcing, one partner might keep the house. The other partner can sell the property to them for a dollar in order to exchange ownership of the assets.  

This is perceived as a quick way to transfer property without having to go through the entire listing, inspection, and appraisal process. However, there are alternatives to the one-dollar home sale.

For example, it is possible to transfer the deed from one person to another, especially in the case of divorcing couples. Through this process, couples can also remove one person from the deed and title as part of the decoupling process.

Cons of Selling a House for a Dollar

There are some drawbacks to selling your house to a family member for a dollar. The main concern is the taxes that come with this exchange.

The government understands that the property is worth more than that and instead registers this sale as a gift. For example, if the fair market value of a property is $400,000 and you sell the home for a dollar, the government believes you gave a $399,999 gift to the recipient. 

Here are some additional considerations as well:

• Gift Tax Implications: The IRS may require the seller to file a gift tax return (Form 709) for the amount exceeding the annual exclusion limit. As of 2024, the annual exclusion is $18,000 per recipient. Amounts above this count against the lifetime exemption, which is $13.61 million per individual. ​
• Capital Gains Tax for the Buyer: The buyer inherits the seller’s original cost basis. If they later sell the property at a higher value, they could face significant capital gains taxes. ​
• Property Tax Reassessment: In states like California, transferring property, even for a nominal amount, can trigger a reassessment at the current market value. However, family transfers may be excluded from reassessment if proper documentation is filed. ​
• Mortgage Considerations: If there’s an existing mortgage, the lender may need to approve the transfer. Selling the property for $1 without settling the mortgage could violate the due-on-sale clause, leading to potential foreclosure.

You can sell your house for a dollar if this is the best option for you right now. However, make sure you have a clear understanding of the tax implications when doing so. 

Steps to Sell Your Home for Below Fair Market Value

If you decide that selling your home for $1 is the best course of action, consider the following steps:

Consult with a Real Estate Agent

Even if you plan to sell a home for just one dollar, you need to talk to a real estate agent. They will make sure the transfer goes smoothly. They can also conduct a comparative market analysis to determine the property’s fair market value for tax purposes.

At FastExpert, you can find an agent who understands the nuances of paying the gift tax and other potential fees like the capital gains tax, estate tax, and outstanding property taxes. They can help you organize your finances and the finances of the family member you are selling a house to.

Make Legal Preparations

Talk to a real estate attorney who can draft the necessary legal documents to secure the deal. This attorney will ensure the new resident fully owns the property and is able to sell it, take out equity on the asset, and use the house as they like.

Too often, aging parents sell a house to a family member symbolically without detailing the home’s value and formally transferring the asset. It is safer for all parties involved to bring in a legal expert. 

Not only will your attorney ensure compliance with local laws, but they will also formally document the current market value of the asset. This is useful for paying the gift tax and for the new owner to better understand the asset they now own.

You can also bring a tax attorney into this process to make sure you take advantage of as many exemptions and credits as possible.

You don’t want to accidentally spend money you don’t have to by overpaying gift taxes to the Internal Revenue Service.

Setting the Right Expectations

Regardless of whether you are selling a house to a family member or working with another individual you know, make sure you communicate your expectations clearly with your buyers. Let them know if there are any conditions that come with buying the house so far below fair market value. 

For example, some parents ask their adult children to continue living in the house after they inherit it. They want to keep the property in the family. This means their kids can’t buy it for a dollar and then sell it immediately for fair market value. While there usually isn’t legal recourse if your child goes against these wishes, it can strain familial relations – especially if other siblings are involved. 

Also, prepare for challenges in the home sale. Document everything so you can easily pay the gift tax or estate tax, whichever option you choose. Even the most basic real estate transactions can become complicated. This is why you need a trusted attorney available to provide tax advice to you and your family members.

What to Know if You’re Buying a Home for a Dollar?

While the burden of the gift tax often falls on the seller, there are some factors that buyers need to consider if they have the opportunity to purchase a home for a dollar.

The sales process might be appealing, but there are long-term factors that affect how you own and sell the property. 

Understanding the Process

Even if you are the recipient of a house sold below market value, it still helps to have a clear understanding of gift and estate taxes. You should know which one your relative opted to pay and whether this will affect your full inheritance. Knowing this now will prevent any shocks when you look at the estate taxes of your relatives in the future.  

Also, knowing your home’s fair market price can help you navigate homeownership after you take over the property. You can accurately file taxes with your state and local governments and keep up with any specific fees related to the property. When selling your house, you can get the full value of the property and use the money from this asset to buy your next residence.  

Finally, talk to your real estate agent about the timeline for this home sale. This can help you understand when you can move into the property and take full ownership of the asset.

Financial Considerations Like Capital Gains Tax

Just because you bought the house below fair market value doesn’t mean the property operates at lower costs. First, you will still need to pay property taxes on the house based on what it is worth. You will also need to keep up with the insurance costs, utilities, maintenance, and homeowner’s association (HOA) fees that come with it. This is often one of the biggest problems that comes with inheriting an estate. 

As you talk to your loved one about inheriting this property, learn if there are any conditions that come with selling the house. Because this is your parent’s gift, they might want you to live in the house. 

There are also challenges that can occur if this isn’t the home you live in year-round. You might continue to live in your own home and rent out the gifted property. When it comes time to sell, you might need to pay capital gains tax on the house. While the Internal Revenue Service has capital gains tax exemptions for a primary residence, they usually don’t apply to second homes, vacation properties, or investments. Know the tax implications of selling before you receive this gift.  

Talk to your parent if you won’t live in the house as your main residence. They might be better off selling the property and paying the gift tax on the proceeds. This way you don’t have to take on the expenses of the home and eventually pay a capital gains tax bill.

Know the Tax Implications of the One-Dollar House Sale 

Selling a house to a family member for a dollar is potentially a good way to give property to a loved one. You can see your child or heir enjoy the property while you are still alive. This is also a great way for your child to grow their financial assets through the real estate market.

However, make sure you fully understand the taxes that come with this transaction. You don’t want to receive a surprise gift tax bill or have an estate tax bill reduce your assets after you pass. 

To make sure this transaction goes smoothly, talk to a real estate professional. They can tell you the fair market value of the home and walk you through the sale. The overall process of selling your home for a dollar can be complex, so you want your agent by your side.

To find a Realtor, turn to the professionals at FastExpert. Find someone who has experience with estate planning so they can help you move your assets without angering the Internal Revenue Service.