Gift Of Equity Contract Example With Loan In Wayne
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The seller must obtain an official home appraisal to ascertain fair market value and also sign a gift letter that describes the buyer-seller relationship and states that the equity is a gift the buyer is not obligated to repay. The buyer must follow the typical process for buying a home.
Gifted equity requirements The letter should be signed by the buyer and the seller. Funds must also be properly documented through financial records. So, be prepared to provide copies of your recent bank statements, your donor's recent bank statements, and copies of cashier's checks.
Gifts of equity, like other gifts, aren't taxable to the recipient. The seller might have to file a gift return. They're allowed to give $15,000 per person each year without having to file a gift return. So, if the gift of equity they gave you is less than $30,000, they don't have to file the return.
Gift of Equity The gift represents a portion of the seller's equity in the property, and is transferred to the buyer as a credit in the transaction.
For example, if you own a home worth $300,000 and sell it to a family member for $200,000, they've received a gift of equity of $100,000. A gift of equity can occur if a home is given away for no compensation or if a discount is offered on its value.
Conventional lenders won't accept gifted equity as a downpayment. Heck, almost no commercial lenders will allow it either. The concept of collateral is really lost at that point.