Selling Your Home to a Family Member in New Jersey

You can sell your home to a family member in New Jersey the same way you'd sell to anyone else, with a contract, a closing and a deed, but the price matters more than usual. If you sell for less than the home is worth, the IRS can treat the difference as a gift, and the realty transfer fee and the buyer's mortgage have their own family rules, so start with a real market value and bring in your attorney and tax professional early.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. Keeping the house in the family comes up a lot when people are downsizing. It can be a great outcome for everyone. Here's what to get right so it stays that way.

What is the home worth?

Everything else follows from that number. The buyer's lender will order an appraisal, your tax professional will want to know the market value, and the two of you need a price you can both defend. Start with my home value page, then let me walk the house and give you a market evaluation backed by recent sales.

What happens if you sell for less than it's worth?

The IRS says that if you sell something at less than its full value, you may be making a gift, and the gift tax applies whether or not you intended it to be one (IRS). In a home sale, the gift is generally the difference between the market value and the price.

• Annual exclusion. For 2025 and 2026, the annual exclusion is $19,000 per recipient (IRS gift tax FAQ).
• Form 709. You generally have to file a gift tax return if your gifts to one person, other than your spouse, total more than that in a year. It's due by April 15 of the following year (IRS Form 709 instructions).
• Filing isn't the same as owing. A gift tax return doesn't always mean tax is due. For context, the IRS lists a $15,000,000 basic exclusion amount for estates of people who die in 2026 (IRS IR-2025-103). Your tax professional explains how the two work together for you.

What is a gift of equity?

It's how a below-market family sale often shows up in the buyer's mortgage. Fannie Mae defines it as a gift provided by the seller of a property to the buyer. It can cover all or part of the down payment and closing costs, it's allowed only on a principal residence or second home, it can't count toward reserves, and the lender needs a signed gift letter and a settlement statement showing the gift (Fannie Mae B3-4.3-05).

Fannie Mae's rules on who can give include a relative, defined as the borrower's spouse, child or other dependent, or anyone related by blood, marriage, adoption or legal guardianship (Fannie Mae B3-4.3-04). Other loan programs have their own rules, so the buyer's lender should see the plan before the contract is signed.

What's the buyer's tax basis?

When a transfer is part sale and part gift, the federal regulation sets the buyer's basis at the greater of what the buyer paid or the seller's adjusted basis, with adjustments, and limits it to fair market value for figuring a loss (26 CFR 1.1015-4). That affects the buyer's taxes when they sell someday, so their tax professional should run it too. On your side, the home sale exclusion still matters; see capital gains when you downsize a long-owned home.

Does the realty transfer fee apply?

Sometimes not. Form RTF-1 lists full exemptions for a transfer between spouses or civil union partners, or between a parent and child (NJ Division of Taxation). The Division's realty transfer fee FAQs add the details:

• A sale between parent and child is exempt, and an adopted child qualifies.
• A stepchild doesn't, unless the stepchild was legally adopted.
• In the Division's example of a parent selling to a daughter and her husband, only one-half of the consideration is exempt.
• No other family relationship is listed, so a sale to a sibling, grandchild or in-law pays the fee like any other sale.

RTF-1 also lists partial exemptions, including one for qualifying sellers who are 62 or older. My article on Form RTF-1 and the partial exemption covers that one.

How does the sale itself work?

Like any other sale, and that's the point. A written contract, an attorney for each side, the buyer's inspection and appraisal, a title search and a closing. Put the price, the timing, what stays with the house and any rent-back in writing.

You need a price you can defend, clean paperwork and someone watching the timeline. When you're buying a smaller home at the same time, I line up both closings so you know where you're sleeping on moving day. The Downsizing Guide shows how.

Frequently Asked Questions

Can I sell my house to my child for $1 in New Jersey?

You can set any price, but the IRS can treat the difference between the price and the market value as a gift. Talk to your tax professional and attorney before you set a token price.

Do I pay the realty transfer fee when selling to my son or daughter?

A sale between a parent and child is exempt under Form RTF-1. If the buyers are your child and their spouse, the Division's example exempts only half of the consideration.

What is a gift of equity?

Under Fannie Mae's rules, a gift from the seller to the buyer that can cover all or part of the down payment and closing costs on a principal residence or second home.

Do I need an appraisal to sell to a relative?

The buyer's lender usually orders one. Even without a loan, a written valuation helps you and your tax professional document the price.

This is general information, not legal, tax or lending advice. Your attorney, tax professional and the buyer's lender confirm what applies to your sale.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

Keep reading

• When I sell my home, do I pay tax?
• What will my home sell for?
• The Downsizing Guide and how I plan a downsizing move
• Have a question this didn't answer? Send it to Dennis Mark.