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Gift of Equity

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lfurr

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Feb 20, 2008
Professional Status
Certified Residential Appraiser
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Pennsylvania
Doing an appraisal on a home, it's a purchase, non arms-length transaction (family member to family member). The contract has a "Gift of Equity" that states the following:

"As part of the purchase price as set forth above, Sellers will gift to Buyers equity in real estate in the amount of Fifty-Six Thousand and 00/100 Dollars ($56,000)."

I assume this amount would be entered on page 1 (of the 1004) in the "Contract" section since page 1 does refer to "loan charges, sale concessions, gift or downpayment assistance", correct?
 

William K

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Sep 21, 2007
Professional Status
Certified Residential Appraiser
State
Illinois
I typically explain it all in the contract section and reiterate the Gift of equity in the sales concession area.
Is the "gift" to be taken out of the contract price or is it on top of the contract price? I have seen it written in contracts both ways so be sure you have clarification and explain your understanding of the agreement.
 

J Grant

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Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Don't put it in sales concession for subject on grid... makes no sense.

Just disclose the gift of equity in contract section, explain it as between family , and go ahead to appraise the subject for market value.
 

Mile High Trout

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Feb 13, 2008
Professional Status
Certified Residential Appraiser
State
Colorado
That's one of those scenarios where you wish you could just do the appraisal, before you know of any contract details.

But it's a good scenario, none the less.

There is no better gift, than to gift equity or land to your family.

The details of the disclosure matter, pertaining to where the money goes. Back into the note and obligation, or just cash, etc.

Never ran across that, all these years.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
MAYBE, just MAYBE, it is a gift = $56k.
 

J Grant

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Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
whatever the impact ,( if any,) the gift of equity has on Contract price, it has nothing to do with our valuation; We appraise subject for market value. As a non arms length transaction with atypical terms you can state the contract was not considered relevant as a value indicator.
 

Peter LeQuire

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Joined
Jan 3, 2005
Professional Status
Certified Residential Appraiser
State
Tennessee
The gift doesn't affect development of the appraisal: it does need to be discussed as part of the analysis of the contract terms. It does affect the underwriting of the loan, and it affects any future use of the transaction as a comparable.

It may affect the love and affection extant in the family.
 

CSP 49

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Joined
Dec 2, 2008
Professional Status
Certified Residential Appraiser
State
Florida
Non arm's length sales can also trigger an automatic field reivew. No reflection on the appraiser but its uncanny how often the gift equals the amount needed to hit an 80% or lower LTV. Purchaser doesn't really have cash in the purchase so extra scrutiny all around.
 

Marty Boone

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Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
Pennsylvania
Maybe you will get the assignment again when they do a cash-out refi.
 

PropertyEconomics

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Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
It absolutely, in my opinion, is a sales concession (gift). It simply needs be reported as part of the contract analysis.
Then the appraisal is simply an appraisal, assuming of course, the report is to conclude market value, simply report the market value of the property and the parties / underwriter do the rest.

Its simply a detail of the contract .. nothing more.
 
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