Answers · Buying & Selling Land
What are the pitfalls and best structures for buying land from family?
The two classic failures in family land sales are pricing without an appraisal and paperwork done by handshake. The fix is the same in every structure: an independent appraisal, a written contract, a real closing with title insurance, and tax advice before — not after — the price is set.
Price below appraised value has consequences: the discount is a gift for tax purposes, reportable against the giver's lifetime exemption, and if the seller later needs Medicaid, below-market transfers within the five-year lookback can disqualify them. An appraisal plus a documented price protects both generations.
Structures that work: a straight sale at appraised value with third-party or seller financing; an installment sale spreading the seller's capital gain; or, where the goal is succession rather than sale, an entity (LLC or partnership) that parents gift or sell interests in over time. Each has different basis outcomes — heirs who inherit get stepped-up basis, buyers do not — so the cheapest-looking path is not always cheapest.
Fairness among siblings is the unpriced risk. A sale one heir considers sweetheart poisons estates for decades. Transparency — shared appraisal, everyone sees the terms — costs nothing and prevents most of it.
The Turnrow angle
Third-party financing keeps family sales clean: Turnrow lends against the appraised value, the seller gets fully cashed out at closing, and no sibling is owed money by another for the next twenty years.
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