Question:

What is Real Estate Gift of Equity?

Answer:

Real Estate Gift of Equity is a sale declared below house market value. Those are usually gifts between family members.

When the seller is gifting the buyer and they are not related, home buyers are advised to use official seller's down payment and closing costs assistance programs, known as DPAs. Otherwise, selling a house for below market value without the lender actually knowing about it is considered fraud.

With a Real Estate Gift of Equity mortgage loan program, lenders allow the difference to count as downpayment. This is useful as it is a great way to become a first-time homeowner with little or no money down.

Very few will pay taxes on Real Estate Gift of Equity.

If the seller/donor is selling the property for what they originally bought the property for, usually no capital gain taxes should be incurred. The Gift of Equity may be completely non-taxable, or if the gift amount exceeds what is allowed the excess could count towards the unified credit for gift purposes.

That is, few people ever have to pay taxes on real estate gift of equity. Double-check with a CPA as for how gifts have to be filed according to IRS rules.

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