Many San Francisco residents may be able to acquire the residential or commercial property they need off the public market by turning to friends and family.
In other situations, a family member may be willing to finance the purchase of a property privately.
When all goes well, these sorts of private real estate transactions benefit all involved and often save a lot of money, including many transaction costs, as well.
However, as much as one might not want to think about it, real estate transactions among relatives and friends can lead to disputes.
- Especially when everyone is getting along, it is important for the parties to be honest about their limits and boundaries. To give one example, how would parents who loan money to their children to buy their first home feel if their children do not pay them back? What would be the appropriate response?
- On a related point, those involved in these transactions need to think about who else may have interest in the real estate down the road. As one good example, how is the seller of a property to their relative going to feel if the relative’s ex-spouse or former romantic partner wound up in possession of the real estate? What if the relative’s other creditors record a lien on the property?
- The taxing authorities and other government officials may take an interest in the details of a real estate transaction. This is especially true if the transaction does not seem to be reasonably priced compared to the open market. It is important that family-friendly sales and loans are legitimate, so authorities do not see them as covers to get a tax advantage or other financial benefit.
Relatives and friends who want to do a real estate deal should know their options
Even if it might at first seem too formal or unnecessary, it is always a good idea for a resident of the Bay Area who wants to do a favor a friend or relative in a real estate transaction to know their options and rights.
They should go through the exercise of thinking through and planning for contingencies and should make sure they handle the details of their transaction properly.