Home Buying in Appleton>Question Details

Heather, Home Buyer in Appleton, WI

What is a "gift of equity" and how does it work?

Asked by Heather, Appleton, WI Wed May 28, 2008

We are buying our first home from my in laws. The proprty is worth 149k and we are buying it for 119.

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Jed Lane’s answer
Tax laws say how much a parent can give a child per year in gifts without triggering inheritance and gift taxes.
Equity is the difference between what is owed and the market value. It can be borrowed against in the form of home equity line of credit (HELOC)
Thank them and be good to your wife.
My sister used to live in Appelton. Very nice area.
2 votes Thank Flag Link Wed May 28, 2008
Jed Lane, Real Estate Pro in San Francisco, CA
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That means you're acquiring $30,000 in instant equity. You're paying $119,000 for a property that's worth $149,000--a $30,000 spread. That's very nice of them.
2 votes Thank Flag Link Wed May 28, 2008
Don Tepper, Real Estate Pro in Burke, VA
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Heather:
It may also help out your in-laws ... depending on the tax situation. Perhaps they will save some capital gains taxes by "gifting" you all or a portion of their gain on the property, especially if this is not their primary residence. We see this happen with first-time home buyers who may have a relative that wants to assist them in their home purchase. Good for you!
1 vote Thank Flag Link Wed May 28, 2008
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