Title Transfer for Seller Financing

[Mark Krusinski jr.]

Hi,

My brother and I are currently in the process of buying a house from my parents. It is a duplex located in the Cleveland Ohio area. My parents do not want to pay capital gains on the property at the moment but are looking to get the property off there hands soon. We are looking to do seller financing with this property (my brother and I are in collage and were unable to get a good loan from any banks). With seller Financing, would by parents have to pay capital gains tax on the property? Also do we need a title transfer before we start the seller financing process? 

This is our first property so we have been doing a lot of research. We could not find find anything about this question that we had online. If someone could help up out on this question that would be awesome!

Thanks a Ton!

[Rob Mcclellan]

Ask your accountant but from my experience they only pay capital gains on what they receive. So if you make monthly payments of $500 with $400 principal and $100 in interest then at the end of the year they would have $1200 of interest income and a possible capital gain of $4800 depending on their basis in the property.