Do I Need an Appraisal to Sell or Gift My Home to a Family Member?

In most cases, yes, it is a good idea. Under the Income Tax Act, related people such as parents, children, grandchildren and siblings are treated as not dealing at arm’s length. When you sell or gift a property to them, the Canada Revenue Agency generally looks to the property’s fair market value on the transfer date, not the price the family agreed on. Because there is no open market sale to point to, an independent appraisal is the clearest way to document that value for your accountant and lawyer.

The family member receiving the property benefits too. The value on the transfer date usually becomes their starting point for any future capital gain.

What Counts as a Family Transfer?

The situations we see most often in London and across Southwestern Ontario include:

• Selling to a child below market: parents help an adult child buy their first home by selling the family house, a condo or a rental to them at a reduced price.

• Gifting a property outright: a parent transfers a cottage, rental or home to a child with no money changing hands.

• Adding a family member to title: a parent adds a child as a joint owner, which can be a transfer of part of the property.

• Buying out a sibling: after a parent’s death, one sibling buys the others’ shares of the family home.

• Selling to a parent: an adult child sells a property to a parent, for example a unit the parent will live in.

Transfers between spouses and common-law partners follow their own tax rules. Whether a particular arrangement is a disposition, and what it means for you, is a question for your accountant and lawyer. Our role is to provide the value as of the right date.

Why the Price on the Agreement Is Not Enough

The CRA’s rules for non-arm’s-length transfers are built around fair market value. In general terms:

• A sale below fair market value: the seller is usually treated as having sold at fair market value. The buyer’s cost, however, is generally the lower price they actually paid. The same difference in value can end up taxed once now and again when the buyer later sells.

• A gift: the person giving the property is generally treated as having sold it at fair market value, and the person receiving it is treated as having acquired it at that same value.

• A sale above fair market value: the buyer’s cost is generally limited to fair market value, while the seller still reports the higher price.

In each case, the outcome depends on what the property was actually worth on the transfer date. If the family’s home was the seller’s principal residence for every year it was owned, the principal residence exemption may shelter the seller’s gain. That is still something your accountant has to confirm, and the value is part of the paperwork. Your accountant applies these rules. We do not give tax advice.

Why a Supported Value Helps the Whole Family

A family transfer often happens years before anyone looks at it again. The parent’s gain is reported now. The child’s cost matters when they sell, which may be decades later. A report prepared at the time of the transfer gives both sides the same documented number, with the comparable sales and market conditions behind it.

It also helps with fairness inside the family. When one child receives a property and another does not, or a sibling buys out the others, an independent value gives everyone the same starting point for the conversation. We cover related situations in our posts on estate planning and settlements and market value vs. assessed value.

What If the Buyer Needs a Mortgage?

If your family member is financing the purchase, their lender will usually arrange its own appraisal for lending purposes. That report is prepared for the lender’s decision and addressed to the lender. It is not necessarily prepared for your tax reporting or as of the date your accountant uses, so it may not serve both purposes. Ask your accountant whether a separate fair market value report makes sense. Our approved lenders page lists the lenders we are approved with for mortgage work.

Your real estate lawyer handles the transfer itself, including how land transfer tax applies to the arrangement, so involve them early.

What the Appraiser Needs From You

A clear brief helps the report fit its purpose. Helpful items include:

1. The effective date: usually the date of the transfer, as confirmed by your accountant or lawyer.

2. The purpose: for example, reporting a non-arm’s-length sale or gift to the CRA.

3. What is being transferred: the whole property, or a share of it, such as a half interest.

4. The property’s condition on that date: recent updates, known issues, and photos if the transfer has already happened.

5. Your accountant’s and lawyer’s contacts: so the report is addressed to the right people.

If the transfer already took place, the appraisal can be prepared as of that past date. The appraiser researches sales and market conditions as they were then.

Local Considerations in London and Area

A family transfer might involve a semi in an older London neighbourhood, a newer house in Komoka or Ilderton, or a rural property outside Strathroy or St. Marys. Each of those markets has its own set of comparable sales, and the value has to reflect the specific area on the transfer date. See our London, Komoka, Ilderton, Strathroy and St. Marys pages for the communities we cover.

Frequently Asked Questions

Can I just use the price we agreed on as a family?

The price you agree on is the price on the agreement. For tax purposes, the CRA generally looks to fair market value when family members deal with each other. An appraisal documents that value separately from the agreed price.

Is an MPAC assessment good enough?

An MPAC assessment is prepared for property taxation and valued as of a fixed base date. It is not an opinion of fair market value on your transfer date.

Can the appraisal be done after the transfer?

Yes. Retrospective appraisals are common. The appraiser uses comparable sales and market conditions as of the transfer date, together with what is known about the property’s condition at that time.

We are only adding our son to title. Do we still need a value?

It depends on the facts, including whether ownership actually changes and what was intended. Your lawyer and accountant can tell you whether a value is needed and for what share of the property.

Does Riverbend provide tax or legal advice?

No. We provide an independent, CUSPAP-compliant opinion of fair market value. Your accountant applies the tax rules and your lawyer handles the transfer.

Getting a Value for a Family Transfer

If a property is moving between family members, a fair market value appraisal as of the transfer date gives everyone, including the CRA, a supported figure. Learn more about our capital gains and CRA appraisals, see how we work with lawyers and accountants, or request an appraisal with the address and the date your accountant needs.