Buying a home from your parents can seem like a convenient and straightforward way to get into homeownership, but it’s important to understand both the advantages and disadvantages of this arrangement before making a decision. In this article, we’ll explore the pros and cons of buying a home from your parents in Washington State.
When parents gift a home to a child, the child receives a carryover basis, which means the parent’s original purchase price, adjusted for improvements, carries over to the child. If the child later sells the home, capital gains tax is calculated based on the difference between the sale price and that carryover basis, which can create a large tax liability if the property has appreciated significantly.
By contrast, when a child inherits a home at the parent’s death, the basis is generally stepped up to the fair market value on the date of death under IRC §1014. This can eliminate or significantly reduce capital gains tax if the property is sold shortly after inheritance. In many cases, inheriting property is more tax-advantageous than receiving it as a gift because the stepped-up basis removes pre-death appreciation from the child’s taxable gain.
Parents who sell their primary residence, including to a child, may be able to exclude up to $250,000 in capital gains if filing single or up to $500,000 if married filing jointly under IRS Section 121, as long as they have owned and used the home as their primary residence for at least 2 of the last 5 years. If parents sell the home below fair market value, the difference between the sale price and fair market value is treated as a gift and may require gift tax reporting. The annual gift tax exclusion per donor per recipient is $19,000 in 2026, and amounts above that exclusion count against the lifetime exemption.
Washington State law, RCW 64.06.020, requires sellers of residential real property to deliver a completed Seller Disclosure Statement, commonly called Form 17, to the buyer. This requirement applies whether the seller is represented by an agent or selling the home FSBO. The disclosure must be delivered no later than 5 business days after mutual acceptance of the written purchase and sale agreement. If it is not provided on time, the buyer’s right to rescind extends until 3 business days after receipt.
Form 17 covers known material defects only, so sellers are not required to investigate unknown issues or hire an inspector in order to complete it. The disclosure categories include structural integrity, water systems, utilities, environmental hazards such as asbestos and lead-based paint, and title or legal issues. Certain transfers are exempt, including foreclosure or trustee sales, transfers between close family members as a gift, transfers by a personal representative of a deceased person’s estate, and transactions where the buyer expressly waives receipt, except for the Environmental section if any answer would be yes.
The seller disclosure statement is for disclosure only and does not constitute a warranty, and it is not considered part of the purchase agreement. Even so, sellers can face legal liability for intentional omissions or inaccuracies after closing.
Decide whether you want to buy your parents’ home with cash, or apply for financing. If the mortgage is assumable, you may be able to take it over with the same loan terms in place, or refinance it into your name. You’ll still need to qualify for the mortgage, and getting preapproved is a good place to start.
When you buy a house from family members, it won’t be an arm’s length transaction between separate parties. This means lenders will look very closely to ensure no-one is being taken advantage of and the lender will likely have restrictions on what type of occupancy they allow. For example many lenders will require the property be used as a Primary Residence. Having a real estate attorney and your family lawyer involved is a good idea, especially if one or both of your parents is unwell, and even more so if the sales price is a steal for the house and the neighborhood.
Title transfer is the legal act of passing property ownership from seller to buyer. This is accomplished through a signed and notarized deed, such as a warranty deed or quitclaim deed, and the deed is then recorded with the county recorder’s office. Before closing, a title company conducts a title search to verify legal ownership and identify any outstanding liens, encumbrances, easements, or other defects that must be resolved before the transfer can be completed.
At closing, the title company facilitates the transfer by preparing the deed and ensuring it is properly recorded in the local land records office. The title policy is issued at that point. Title insurance policies are not transferable to a new buyer, because they are tied to the original insured party and coverage ends when the property changes hands. Each new buyer must purchase their own policy.
Owner’s title insurance protects the buyer from post-closing claims arising from pre-existing title defects, including forged documents, undisclosed heirs, unpaid liens, or errors in public records. It is generally a one-time premium paid at closing and protects the buyer for as long as they hold an interest in the property.
Buying a house from your mom and dad can be tricky, and you don’t want the process to wreck your relationship with them or with any siblings or other family members. A home isn’t worth having to stay at arm’s length on holidays for years after the fact.
When you buy a house from family members, there’s always a chance of friction if you aren’t paying market value, or if you’re accepting a gift of equity. You need to ensure your parents are completely on board, and won’t end up with sellers’ remorse when they think about how much they could have got selling privately for fair market value.
On your side, getting that home inspection and setting aside funds to pay for any repairs that may need to be done is the responsible thing to do and can keep you from feeling resentful if a year or two down the road the HVAC gives out or the home needs other major repairs.
Treat the entire transaction as you would have if you’d decided to purchase a home at a normal sales price through a standard purchase agreement with a total stranger. Even if your purchase price is discounted for being family, you and your parents should keep things professional as buyer and seller.
In most U.S. jurisdictions, a sale or transfer of property ownership triggers a review by the local assessor or appraisal district, which may reassess the property to its current fair market value as of the date ownership changed. A reassessment does not automatically increase the property tax bill, because the actual tax owed depends on the tax levy set by local taxing authorities such as school districts and municipalities, not just the assessed value.
Rules vary by jurisdiction. In California, Proposition 13 requires county assessors to reassess property to current fair market value upon a change of ownership, and the recorded sale price or title transfer starts that review. In Texas, buying a home triggers a reassessment by the county appraisal district, which may adjust the taxable value to align with the sale price. Existing homestead and other exemptions are removed when ownership changes and must be reapplied for by the new owner.
Because property tax reassessment rules are state- and county-specific, buyers should verify local rules and available exemptions, including homestead, senior, and veteran exemptions, in the specific location where the property is located.
Buying a house from your parents should start the same as every other real estate transaction. The fact that you’re buying said real estate from a family member doesn’t mean you get to skip the home loan process, unless you’re paying cash. Get preapproved for your purchase and then you’ll be able to hammer out the details with mom and dad.
At Sammamish Mortgage, we have a streamlined preapproval process, and can help you manage buying your parents’ house. Our real estate professionals have shepherded thousands of loans from preapproval to closing, and can assist you through the tricky business of buying from a family member. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been offering multiple mortgage programs with flexible qualification criteria to borrowers across the Pacific Northwest, including our Diamond Homebuyer Program, Cash Buyer Program, and Bridge Loans. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, contact us if you’re ready to get pre-approved for a mortgage.
Yes. You can buy a home from your parents in Washington State, but the sale should be handled like any other real estate transaction with proper pricing, documentation, financing, and legal review.
It can be. Parents may agree to a lower sales price, a gift of equity, or fewer sale-related expenses, but closing costs, appraisal, inspection, and lender requirements may still apply.
A gift of equity is when your parents sell the home for less than its market value and the difference is treated as a gift. It can help with your down payment and may reduce the amount you need to borrow.
Yes, unless you are paying cash. Most buyers still need to qualify for financing, and lenders usually review family sales closely because they are non-arm’s-length transactions.
Yes. Preapproval helps you understand your budget, shows that financing is possible, and makes it easier to set realistic terms before finalizing the sale with your parents.
In most financed purchases, yes. Lenders commonly require an appraisal to confirm the home’s market value and support the loan amount.
Yes. A home inspection helps identify needed repairs and reduces the chance of future disputes or resentment over hidden issues after closing.
Sometimes. If the existing mortgage is assumable, you may be able to take over the loan under its current terms, but you still generally need lender approval and must qualify.
Common risks include family tension, disagreements over price, tax concerns, repair disputes, and legal problems if the transaction is not documented properly.
It is a good idea. A real estate attorney can help with contracts, disclosures, title matters, and other legal details, especially when the sale involves family relationships, discounted pricing, or a gift of equity.
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