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 they want ... Read Answer >>
  2. If a parent transferred a house deed to their three adult children, do they need ...

    Currently, only the parents Read Answer >>
  3. Who will pay taxes on my grandmother's home?

    I don't own a home, but I have the power of attorney for my grandmother who will be going into a nursing home. I've decided ... Read Answer >>
  4. How can my husband inherit a house deed?

    My mother in law wants to know the best way to leave the deed to her house to her son (my husband). Should it be left in ... Read Answer >>
  5. Justin and Britney, multi-millionaires, want to make the maximum gift of cash to ...

    The correct answer is c. A donor of money and/or gifts may give up to $12,000 to as many different recipients as they desire ... Read Answer >>
  6. How should I report my quitclaim deed?

    I live in Louisiana. My daughter and the rest of my family live in New Jersey. Two years ago, they didn't have enough credit ... Read Answer >>
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