Has anyone bought a parent's house through a gift of equity like this?

Absolutely a gift of equity can be a way to structure a family purchase, but there are a few important pieces to get right. The lender will typically need documentation showing the agreed-upon purchase price, appraised value, and the amount being gifted. Since the property is part of an estate, it’s also important to make sure all of the owners/heirs agree to the sale and that the title and estate documents are in order. I’d recommend having the lender, title/escrow company, and an estate attorney coordinate before moving forward so everyone is clear on how the equity gift and below-market purchase price will be handled.

Soledad, speak with a real estate attorney to discuss your concerns. Keith Jean-Pierre Managing Principal The Dapper Agents Real Estate Operations in ALL 50 States

Yes, this type of family transaction can work, but there are a few moving parts. If the house is appraised at, for example, $500,000 and your dad and his siblings agree to sell it to you for $350,000, the roughly $150,000 difference can potentially be structured as a gift of equity and used toward your down payment, subject to the lender’s guidelines. Fannie Mae currently allows gifts of equity from eligible relatives, including parents, for a principal residence or second home. The important part is getting the estate/title ownership, appraisal, purchase price, gift-of-equity documentation, and lender approval lined up correctly, especially because this involves your late grandfather's property and multiple family members. There can also be gift-tax reporting and future capital-gains basis implications, so the family should have the title/escrow company and a CPA or estate attorney review the structure before signing anything. Ad

Soledad, the structure itself is solid. Lenders see gifts of equity regularly, and one from a parent can cover your entire down payment as long as the file includes a signed gift letter and the credit shows up on the settlement statement. Two details in your version need care. If your dad's siblings still hold shares of your grandfather's house, that $150k discount is legally a gift from every owner, not just your dad, so get everyone's agreement in writing early. Large gifts also mean a tax filing for each giver, though usually nothing is owed. And the lender's own appraisal sets the value, not the one the family orders, so the gift shrinks if it comes in lower. Before you commit, ask a CPA or the Riverside County assessor how the transfer affects your property taxes, since reassessment on inherited family homes catches people off guard. Worth an estate attorney's hour too. Alla Novytska, Realtor®, JohnHart Real Estate, DRE #02254775

Yes, this type of transaction can work, but there are a few important pieces to get right—especially because you're dealing with an inherited property, multiple family members, a below-market purchase price, and a gift of equity. A gift of equity can generally be used toward a buyer's down payment and closing costs when the transaction meets the lender's requirements. For example, Fannie Mae allows qualifying gifts of equity from eligible relatives and requires documentation such as a gift letter and settlement statement. The part I would be particularly careful about is the $150,000 difference between the appraised market value and the purchase price. That difference may potentially be treated as a gift, depending on how the transaction is structured. The lender, title/escrow company, and tax professional should all review it before anyone signs a purchase agreement. The IRS generally considers transfers for less than adequate consideration to potentially be gifts, and there can also be tax implications involving the property's basis. Since this involves your late grandfather's estate and multiple heirs, I would also make sure everyone who actually has an ownership interest has properly agreed to the sale and that title/estate issues have been cleared before moving forward. Important disclaimer: This is general real estate information, not legal, tax, estate-planning, or mortgage advice. Every family/estate situation is different. I would strongly recommend having a qualified real estate attorney or estate attorney, CPA/tax professional, title/escrow company, and your mortgage lender review the proposed structure before proceeding. — Juan Picos, Realtor

Hi Soledad. Yes, this type of gift-of-equity family purchase is common, but the details matter. The biggest issue is making sure all legal owners and heirs have clear authority and agreement to sell, especially since the home came from your grandfather's estate. Have the lender structure the gift properly, get an independent appraisal, and have a real estate attorney and CPA review the estate and potential tax implications. A below-market sale can also trigger gift reporting requirements. If you're considering a family purchase like this, contact me and I can help guide you through the real estate side and connect you with the right local professionals for a smooth transaction. Diya Sarin | DRE 02095684 📞 818.799.7230 📧 [email protected] 🌐 diyasellsla.com IG: diyasellsla

Soledad, this structure gets done all the time and it can absolutely work, but there is a trap buried in how you described it, so let me lead with that: if the house is still your late grandfather's, then the discount is not your dad's to give by himself. It is a gift from every person who owns a share. Start with title, before you talk to a single lender. Find out who is actually on title today. There are three possibilities and they have very different timelines. The house may still be in your grandfather's name, in which case it has to clear probate before anyone can convey it. It may be in a trust, in which case the trustee can sell it and things move quickly. Or the heirs may already have been deeded their shares, in which case they can sell as co-owners. You cannot buy from your dad if your dad does not yet own it, and in California a sale out of a probate estate to a family member may require court confirmation and notice to the other heirs. That one fact will set your entire timeline, so get it answered first. Here is why it matters for the gift. If your dad and his siblings each own a share, then selling to you at roughly $150,000 under market is a gift from each of them, in proportion to their share, not a gift from your dad alone. Anyone who gifts more than the annual exclusion, which is $19,000 per recipient in 2026, files their own IRS Form 709. That is a filing, not a tax bill. The lifetime exemption is $15 million per person in 2026, so realistically nobody in your family will owe actual gift tax. But every aunt and uncle needs to know in advance that they are signing up for a tax return, because finding that out in April is how family deals turn sour. The good news is on basis, and it runs in your family's favor. Property inherited from your grandfather generally gets its basis adjusted to the value at his date of death. So the sellers are unlikely to be sitting on a large taxable gain at today's value, and the below-market portion is treated as a gift rather than as sale profit. That is the opposite of what happens with a lifetime gift, where you would inherit the giver's old basis and carry the built-in gain forward. Have a CPA confirm it for your family's specific facts, but it is usually the piece that makes these deals painless. On the lender side, what you are describing is a gift of equity, and Fannie Mae addresses it directly in Selling Guide section B3-4.3-05. It works, it can fund all or part of your down payment, and the file needs a signed gift letter identifying the donor and the relationship, stating the amount, and confirming that no repayment is expected, plus a settlement statement showing the gift. Your dad qualifies as an acceptable donor. Two things people get wrong here. First, the lender's own appraisal controls, not the family's appraisal, and the gift equals appraised value minus contract price, so if the lender's appraiser comes in lower than the number your family agreed on, your gift shrinks and your down payment shrinks with it. Second, tell your loan officer on day one that this is a family sale with a gift of equity, so the file gets structured correctly from the start instead of being rebuilt at underwriting. One California item that will cost you real money if nobody raises it. Property tax. Check whether this transfer can qualify for a Proposition 19 intergenerational exclusion, but go in expecting the answer to be no. The grandparent-to-grandchild exclusion only applies when the parents who connect you to that grandparent are deceased. Your dad is alive, so that path is closed, and Riverside County will reassess the property to its current market value. Your tax bill will be based on today's value, not on your grandfather's old Proposition 13 basis. Get the assessor's current assessed value and run the new number before you sign anything, because that monthly figure surprises people badly and it does not go away. I am a real estate professional, not an attorney or a CPA, and this deal genuinely needs both, an estate or probate attorney for the title and consent questions and a CPA for the Form 709 and basis questions. Spend the few hundred dollars now. I work the Palos Verdes Peninsula and the South Bay, so Riverside is not my backyard and I would not pretend otherwise, and I am glad to point you toward a strong Riverside agent. That said, the probate, gift of equity and Proposition 19 pieces are California-wide and I am happy to talk any of it through with you. My name is Zoltan Peresztegi and you are welcome to reach out. Zoltan