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Old 10-14-2011, 12:08 PM
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Default "Gift of Equity"

Not real urgent, but I was just wondering how these contributions are made.

Does the "gift of equity" in a non arms length transaction get credited back to the buyer/borrower post closing from the proceeds to the seller or are these contributions made prior to the close escrow. Wouldn't the seller need the proceeds from the sale in order to gift back to the buyer?
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Old 10-14-2011, 12:15 PM
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Typically no money changes hands, the seller is giving part of the equity for no cash consideration. A famly member sells you a house worth 100k and gives you a gift of equity of $25,000, you pay $75k at closing and everyone goes their merry way.
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Old 10-14-2011, 03:24 PM
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What Rex said. UW rules related to gifts of equity used to be quite dicy, can't imagine now.
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Old 10-15-2011, 12:25 AM
CindyR CindyR is offline
 
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In my experience they simply inflate the sale price to unreasonable levels. Sometimes it is an exercise to avoid mortgage insurance.
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Old 10-15-2011, 08:28 AM
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There are also sales in which the gift of equity does not come from the seller of the property, in which case lenders generally require that the donor have the springs to make the gift, and, prior to closing, verify that the funds have actually been transferred to the buyer.
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