Gift Of Equity

What is 'Gift Of Equity'

The sale of a home made to a family member or someone with whom the seller has had a previous relationship, at a price below the current market value. The difference between the actual sales price and the market value of the home is called the gift of equity. Most lenders allow the gift to count as a down payment on the home.

BREAKING DOWN 'Gift Of Equity'

A gift of equity requires a gift of equity letter that is signed by both the seller and the buyer. A gift of equity can have tax consequences, as it could impact the asset's cost basis for the new homeowner and have capital gains implications for the seller.

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RELATED FAQS
  1. How does the gifting process work with a deed transfer?

    My parents own a home that they would like to "gift" to my husband and me. The house is in my parents name and ... Read Answer >>
  2. Can I give stock as a gift?

    Stocks, bonds or any other securities can be transferred as gifts. Giving the gift of stock also has benefits for the giver. ... Read Answer >>
  3. Do I have to claim a quitclaim deed on my taxes this year from 2000?

    Back in 2000, my mom had a quit claim deed done on the house with my husband and I being the names add... Read Answer >>
  4. Can a mother deed a property to her daughter to qualify for a reverse mortgage?

    A 100 year old mother owns a $225,000 FMV home. Her 80 year old daughter lives with her. They need a m... Read Answer >>
  5. My father gives me money each year through CDs to avoid taxation, and then takes ...

  6. How do I calculate how much home equity I have?

    Find out how to calculate the home equity in your home, your home equity percentage and the loan-to-value, or LTV, based ... Read Answer >>
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