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Buying first home from Grandparents.

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BigGulps

Junior Member
What is the name of your state (only U.S. law)? New Jersey

Hello,

This is my first post on this forum. There is a lot of great information here and I was hoping someone could help me. I have been living at my grandparents' house for the past 10 years because it was closer to college. When I got a job in 2011, I started kicking back some money every month. My grandparents' fell on some hard times a couple years ago and decided to put the house in their 5 childrens' names and basically gifted the house to them for $100. They still have 'Life rights' to the property which I believe means they retain all the rights of an owner until their death. Their health is gradually declining and they are not doing well financially so my Aunt decided she wants them to move in with her. I offered to buy the house from them and they accepted my offer. My questions are as follows:

What is the best way to go about doing this?

Do I need a lawyer in the state of NJ?

Is there a way they can still stay in the house and I can pay them in sort of a rent to own deal?

Is there a way their children can save on Capital gains? (My grandparent's have made improvements to the house, but I can guarantee they kept zero receipts).

Are the capital gains based off the original sale of the house my grandparents bought it for or the gifted amount of $100?

Any advice is greatly appreciated!

Thank you in advance.
 


LdiJ

Senior Member
What is the name of your state (only U.S. law)? New Jersey

Hello,

This is my first post on this forum. There is a lot of great information here and I was hoping someone could help me. I have been living at my grandparents' house for the past 10 years because it was closer to college. When I got a job in 2011, I started kicking back some money every month. My grandparents' fell on some hard times a couple years ago and decided to put the house in their 5 childrens' names and basically gifted the house to them for $100. They still have 'Life rights' to the property which I believe means they retain all the rights of an owner until their death. Their health is gradually declining and they are not doing well financially so my Aunt decided she wants them to move in with her. I offered to buy the house from them and they accepted my offer. My questions are as follows:

What is the best way to go about doing this?
Because of the life estate, this is going to be a little more complicated than an ordinary sale. You will be buying out your grandparent's life estate, as well as buying the remainder value from the deeded owners.

Do I need a lawyer in the state of NJ?
I am pretty sure that you are going to need one for this transaction.

Is there a way they can still stay in the house and I can pay them in sort of a rent to own deal?
That is possible if everybody agrees.

Is there a way their children can save on Capital gains? (My grandparent's have made improvements to the house, but I can guarantee they kept zero receipts).
Nope, because the house was gifted to them their basis is the grandparent's original purchase price. If they cannot prove any improvements, there is nothing that can be done about that.

Are the capital gains based off the original sale of the house my grandparents bought it for or the gifted amount of $100?
See the above response.
 

BigGulps

Junior Member
Because of the life estate, this is going to be a little more complicated than an ordinary sale. You will be buying out your grandparent's life estate, as well as buying the remainder value from the deeded owners.



I am pretty sure that you are going to need one for this transaction.



That is possible if everybody agrees.



Nope, because the house was gifted to them their basis is the grandparent's original purchase price. If they cannot prove any improvements, there is nothing that can be done about that.



See the above response.
Wow, thanks for the quick response..

Should I just approach this as a normal home purchase and go through the whole home buying process minus the Realtor?

Is there any other way that I can purchase the home from my family to save them on Capital gains such as a 1031 Real Estate exchange?

Thanks again
 

OHRoadwarrior

Senior Member
This is a lawyer assisted transaction. You need to have them disclaim their life estate and purchase the property from all titled owners. You can then grant them a twenty year or so lease for $1 per month noting you as a live in landlord.
 

BigGulps

Junior Member
This is a lawyer assisted transaction. You need to have them disclaim their life estate and purchase the property from all titled owners. You can then grant them a twenty year or so lease for $1 per month noting you as a live in landlord.
Hi, which one of my questions are you addressing? Can you elaborate on this scenario a little more?

Thanks!
 

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