Can My Parents Sell Me Their House For a Dollar?

If your parents are thinking about selling you their home for just $1, it’s either a testament to their remarkable generosity or your exceptional negotiating skills. While the price may seem minimal, this is a significant transaction. It’s important to carefully consider how such an unusual asset transfer might affect you and your family before making any decisions.

To provide you with accurate insights, we asked a top real estate agent and a veteran real estate attorney to answer some of the most common questions regarding this type of transaction.

Disclaimer: This post is for educational purposes only and does not constitute legal or financial advice. If you need assistance navigating the legalities or tax implications of selling a house to a family member, HomeLight encourages you to reach out to your own advisor.

Can my parents sell me their house for $1?

Yes, your parents can legally sell you their house for $1. The significance of that $1, however, is mostly symbolic. They can simply give you the house outright and it will carry the same tax and ownership implications, says Robert S. Pecharich, a real estate attorney and senior partner with Boyle, Pecharich, Cline, Whittington & Stallings P.L.L.C. in Prescott, Arizona.

“Either way, [the parents] are making a gift,” Pecharich says. He adds that some people might believe that selling a property for $1 means there is consideration involved and the transaction is binding. However, you can transfer property either as a complete gift or for a nominal amount like $1, and both methods are legally valid.

The only time that $1 might be necessary is if a fiduciary arrangement, such as a trust, requires it, says Rick Ruiz, a top-selling real estate agent in Las Vegas, Nevada, who sells properties 47% quicker than the average Las Vegas agent.

“Rhetoric in the trust may mandate that anything has to be sold and can’t be gifted,” Ruiz says. “But at the end of the day, what [the parents] are really doing is giving you the property.”

According to the IRS, if you transfer money or property to someone without receiving full value in return, it is considered a gift. The value of that gift must be reported using a gift tax return, IRS Form 709. This doesn’t necessarily mean you owe any taxes on that gift, however.

Here are some key points and helpful tips to consider when gifting property:

Gift tax annual exclusion: The annual federal gift tax exclusion is $18,000 for single filers and $36,000 for married couples filing jointly. Meaning, you can individually give up to $18,000 to as many people as you want in a given year without having to report it to the IRS. Spouses who combine their gift exclusion (known as “gift splitting“) must still file a gift tax return, but it won’t affect their lifetime gift tax exemption unless it exceeds the $36,000 threshold.
Lifetime gift tax exemption: Under the current federal law, the lifetime gift tax exemption is $13.61 million. This means someone can give away up to that amount in their lifetime before having to pay any gift tax. Assuming no changes, this exemption amount is set to expire at the end of 2025. Starting January 1, 2026, the exemption will drop to about $6.2 million.
Gift letter: To properly give a gift of equity, the seller should draft and sign a gift letter listing all pertinent information regarding the gift. The letter should include the seller’s relationship to the buyer, the property’s address, and the amount of equity being gifted.
Follow IRS Rules: You will need to be extra careful with how you handle the entire transaction. You’ll want to take steps to prevent the appearance of impropriety when the IRS reviews the transaction.

Example:

Let’s say Linda wants to sell her home to her son, Robert, for $1. Linda gets the home appraised and it’s valued at about $400,000. To make sure everything is handled correctly, she hires a real estate agent to manage the paperwork. They then sign a purchase agreement, run a title search to make sure the title is clean, and close the sale.

When tax season rolls around, Linda reports a gift of $399,999 to the IRS. Assuming she has never declared a gift before, that amount is subtracted from the full $13.61 million lifetime gift tax exemption ($13,610,000 – $399,999 = $13,210,001). Due to the exemption, she pays no gift tax on the transaction.