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Want to give a younger relative a healthy head start financially, or to keep a sentimental home in the family? Whatever the situation, buying or selling a home to a family member can be a win-win situation. Here’s a few things you should know to help the transaction go smoothly.

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Non-Arm’s Length Transaction

When the buyer and seller have an existing relationship, this is called a non-arm’s length transaction. Because of the existing relationship, there are some government and lender guidelines to follow. The IRS may keep a closer eye on non-arm’s length transactions, but if you follow the recommended guidelines your transaction should stay on track.

For example, be sure to have an inspection to protect the buyer, and hire a home appraisal agent early on so you know the fair market price of your home. This way, the buyer and the seller can come to a fair agreement on the price of the home without raising any red flags.

Gift of Equity

Giving a gift of equity, or selling your home to a family member below market value, can be a great way to help your loved ones financially. However, selling your home to a family member for a low price has its own set of rules. Most lenders allow the gift to go toward a down payment and the process requires a gift of equity letter that both the buyer and seller will sign.

When giving a gift of equity, frequently from parent to child, it’s important to keep in mind things like possibly triggering a gift tax, and potentially affecting sales of comparable homes in the area if you sell well below market value. Don’t worry, you won’t have to learn all the ins-and-outs for yourself; You can consult with a lender who knows the rules and can guide you.

With a little preparation and research, you and your family member will be exchanging keys and signing on the dotted line in no time! If you need help transferring property to a family member or giving the gift of equity, contact New American Funding – we can help.

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Read more at https://www.newamericanfunding.com/blog/gift-of-equity/#F5zTmS4eisHcXiQ4.99

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While the Mortgage Bankers Association (MBA) is predicting newly constructed homes sold at a much higher rate in November than they did a year earlier, sales are expected to be down significantly from this past October. MBA's Builder Application Survey (BAS) data for November 2019 shows mortgage applications for new home purchases increased 27.1 percent compared to November 2018 but were down 17 percent from the prior month. This change does not include any adjustment for typical seasonal patterns. Based on the application data and information about market coverage and other data, the association estimates new single-family home sales were running at a seasonally adjusted annual rate of 688,000 units during the month. This estimate is a decrease of 13 percent from the October pace of 791,000...(read more)

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