A grandmother sells her house to her granddaughter and gifts the down payment instead of charging for it. The video explains how gift of equity works legally and financially in real estate transactions between family members.
The equity is usually a transaction that involves family members where the seller wants to gift the buyer's down payment who is also in their family. So in this example, we have grandma wanting to sell her house to granddaughter wants to profit $130,000 off that transaction. We had to write up the contract at $135,000 purchase price. The $5,000 difference is the gift of equities to grandma's giving her house, collecting 130 grand. And we're saying the house has at least $5,000, which covers granddaughter's down payment. She has to come out of pocket with nothing. We just need grandma to sign a gift letter to say she knows it's all real, and we need the appraisal to come in at least to 135,000.
