can my sister sell me her house for less than its worth? its worth 640,000 and she wants to sell for 550,000 i have had an appraisal already

Asked by mrnice171, Alexandria, VA Thu Jul 11, 2013

she owns 370,000 to the bank , and she is willing to give me a gift of equity of 110,000
so i would buy for 550,000 with her gift of 110,000 i would have to finance 440,000 which i qualify for it , can it be done?

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Claudia Mull…, Mortgage Broker Or Lender, Fremont, CA
Tue Dec 8, 2015
Old question...but very common.
Yes, any one person can sell you a home at any price of their choosing.
Gift Equity is perfectly acceptable with a gift letter.

To ascertain the value, the lender will request a new appraisal.

The actual value of the home for loan to value purposes is going to be the new purchase price regardless of appraised value.

In this case $440/$550 would be 80%.

It can be one and I am guessing ....has already been done with much success!!

The new property tax bill will be calculated on your purchase price of the home.
0 votes
Jose Legaspi, Agent, Fullerton, CA
Thu Jul 11, 2013
I don't have to tell you that, yes, it is possible. It is not that complicated of a transaction.
Experience shows that, as long as the homeowner has equity, he/she can sell the property at an agreeable price.
You may call me if you like me to give you more details or you want information on current market trends in the area.
0 votes
Walter 'Skip'…, Agent, Brea, CA
Thu Jul 11, 2013
All good answers so far. One more thing to keep in mind is the tax effect. The tax assessor may assess your home at market value not the lower price. Also, there may be cost basis and income tax issues regarding such a transaction. It is best to consult a tax professional before proceeding.
Good Luck,
0 votes
Grant Fawcett, Mortgage Broker Or Lender, Tustin, CA
Thu Jul 11, 2013
Mr Nice:

I'm a mortgage banker. Sally hit the nail on the head. In this case - you would be getting a really good deal. As long as your sister pays her current mortgage off - she can sell the house for what ever price. However - A lender will only "loan" on the lower of the two either sales price or appraisal. So if your sister sells the house to you for $550,000 and the appraisal comes out @ $610,000- - The lender will only lend on the lower of the two - In this case $550,000.

The lender will still require a downpayment and your debt to income ratios would still need to be in line in order to get a loan. Stay away from FHA @ 3.5% down. FHA just changed the rules and you pay mortgage insurance for the entire term of the loan. Ouch.

It's much better to go conventional financing with as little as 3% down (you will pay mortgage ins for 5 years) or you can put 20% down and avoid mortgage insurance. The only person who would benefit is YOU - Since now you would have $110,000 equity built into your house. You can't use this equity in lieu of a downpayment.

Call with questions!

Grant Fawcett
Mortgage Banker
Castle & Cooke Mortgage
Ph: (949) 212-4578
gfawcett@castlecooke.com
NMLS# 623453
0 votes
Sherry Sims, Agent, San Clemente, CA
Thu Jul 11, 2013
Yes, she can. And there may be several ways for you to finance the property.

There is a terrific loan program available that only requires 1/2% down payment! It's really nice because the buyer is given a 3% non-repayable grant towards the down payment for a total down payment of 3.5%.

That means that not only will you benefit from the gift from your sister, but you will also be given the 3% grant. AND it can be structured so that the seller (in this case your sister) can pay the closing costs for you. I can show you how to get into the property for very little down, and structure it so your sister receives the amount the two of you have agreed on.

For more information about this excellent loan program call me at 949-436-0446.

THANK YOU,
Sherry Sims, Realtor
Evergreen Realty, HomeSmart
http://www.OC-Sold.com
0 votes
Emily Knell, Agent, Huntington Beach, CA
Thu Jul 11, 2013
Everything I just mentioned below, especially related to the AITD option, I can help you to put that all together in a purchase agreement with your sister & outlining that type of financing terms & work with my escrow co. to make it happen for you.

Again, just shoot me an email directly or call me, I don't look back on this same Trulia posting for answers after mine.


Emily S. Knell
EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Realty ONE Group
0 votes
Emily Knell, Agent, Huntington Beach, CA
Thu Jul 11, 2013
Your Options:

1. If you can afford & qualify for a MAX loan amount of $440K, and you need to put something down in order to get that loan, the minimum would be 3.5% on an FHA loan, so your purchase price is going to need to be something like $455,400. Not $550K

2. Then, your sister is basically going to be giving you a $184,600 gift of equity (this is only money that can go in your bank account when YOU sell the property), which it doesn't sound like that's what she was shooting for with the scenario you had wanted to happen.

3. If you can't qualify for a $440K loan because you don't have any down payment money, she wouls just sell the home, for $640K to a buyer who can qualify for that type of purchase price w/ 3.5-20% or more down & you sister can take those proceeds from the sale & still GIFT you the $110K for a down payment for you on another house.

4. OR you could do an "All Inclusive Trust Deed" whereby you basically take over HER pymts on that $370K loan balance, this would require ZERO down payment from you. If your sister wants to be paid some more money, she could also take back a 2nd loan, on top of the existing $370K, in the amount up to $440K which would be another $70K, you & she can work out an interest rate & you'd be making pymts to her.

After keeping track of pymts you're making on the "AITD" & the 2nd lien to your sister, you can then, in the nearer future (2-3yrs) refinance the house into your name only, as borrower & owner & then you'd end up with the loan amt you can afford & a home with a lot of free equity from a Great Sister. And when you do go to refinance, you can finance that amount in the low $400's, payoff that $370K-ish loan & the difference can be paid to your sister in CASH.

If you'd like to talk to me some more about your options, feel free to shoot me an email directly, I don't look back on this same Trulia posting for answers after mine.


Emily S. Knell
EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Realty ONE Group
0 votes
Aaron and Ch…, Agent, Eau Claire, WI
Thu Jul 11, 2013
Yes it can. Just get in touch with your lender to get all the details on financing options. What a nice sister!
0 votes
Cindy Davis, Agent, San Diego, CA
Thu Jul 11, 2013
Your sister can sell yu her home at any price she wishes!
0 votes
Sally Grenier, Agent, Boulder, CO
Thu Jul 11, 2013
Of course! Your sister could sell her house for whatever she wants -- as long as she has enough to pay off her mortgage, which sounds like she does. But you need to sit down with a lender first. I think you're looking at the $110K "equity gift" as a down payment, which it isn't. You're just getting a really good deal on a house. The lender is going to want you to have a certain downpayment toward your loan (like 20%). You cant just get $440K loan without putting any money down! And the lender is still going to have you get an appraisal. Good luck!
0 votes
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