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February 25, 2018

Don’t Get Caught in the Middle

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Don’t Get Caught in the Middle

They're not your relatives, but buyers' parents can bring on another tricky family dynamic.

It's not unusual for parents to want to invest in their adult kids' future. But a combination of factors—job gaps in the weak economy, tight lending standards, and student loans—may be leading more young adults these days to seek the support of their parents (or grandparents) in the purchase of a first home. That support adds a layer of complexity to the transaction. Whether the parents are providing help with the down payment, cosigning a mortgage, or bankrolling the entire purchase, prepare yourself for a transaction that involves the interests and emotions of multigenerational parties. Here are tips for managing parent-child homebuying challenges:

Get details on what to include in a gift letter, the timing of gift funds, and more.

Gain the parents' trust. Early on, let the parents know how you work. Introduce them to your network, including lenders, insurance agents, and home inspectors. "Once they're confident that you have their child's best interests at heart, they'll be more likely to take a backseat in the transaction," says Henri Ellis, a sales associate with William E. Wood & Associates, a Howard Hanna company, in Virginia Beach, Va.

Establish a separate relationship with the parents. Consider holding a separate buyer consultation with the parents to learn if their goals and concerns align with those of their child, says CC Underwood, a team leader at Keller Williams Realty in Jacksonville, Fla.

Schedule showing appointments through the child. Don’t take it into your own hands to invite parents. Let your clients take the lead.

Acknowledge parents' concerns. When you know parents' perspective, you’re less likely to be tripped up by it. Say you’re working with a client whose dad has expressed a clear preference about the type of property his child should buy, but the client is leaning in another direction.  "You could say, ‘Suppose your father was here. What would he want you to do?'" says Jason Forrest, chief sales officer of Forrest Performance Group in Fort Worth, Texas.

Have the child's back—but don't pit parent and child against each other. To help with parental control issues, ask parents what worked well in their first homebuying experience—presumably sans parents—and explain how you'll strive to give their child the same experience, Underwood says. If there are conflicts over location or amenities, it may help to point out that the preferences of a first-time buyer may be quite different  from those of someone who has bought and sold three or four homes. Disagreements may still arise; resist the urge to dismiss parents' opinions. Presumably, the parents are here because the child wants or needs them.

Document the source of funds. You've done a stellar job of navigating the parent-child relationship; don't let the details derail your sale. When parents provide funds for a home purchase, they need to make clear whether the money is a gift or a loan. If it's a gift, they must provide a gift letter and other documentation, which varies by loan type. The lender will explain exactly what's needed, says Lindsay Villasenor, a Quicken Loans divisional vice president.

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