Source: Fortune
Summary
A gift of equity occurs when a home seller reduces the purchase price below the appraised value, effectively transferring equity to the buyer. This can help cover down payments and closing costs. The process requires an appraisal, a gift of equity letter, and lender approval. Tax implications exist for both parties, though most family transactions fall within gift tax exclusions. Rules vary by loan type, with conventional, FHA, VA, and USDA loans allowing gifts of equity under specific conditions.
Our Reading
The numbers tell one story.
Sellers reduce prices to transfer equity to buyers.
Appraisals and gift letters are required for approval.
Tax rules vary by loan type and gift size.
The gift of equity is a family tool, not a financial transaction.
Author: Evan Null
