We recently received a question from a client: “Can we gift equity in our home to our child/children?” The short answer is that it depends. Typically, you can gift equity in a home that you own when you sell that home to your child. This is called a “gift of equity.” Most lenders will allow a gift of equity as long as the gift is documented correctly, which means that it must be based on an accurate appraisal and clearly stated in the purchase and sale agreement.
What if you are buying a home that is not owned by a family member and your family wants to give you money to assist in purchasing the home? This is referred to as a “gift of funds.” It is easy to confuse a gift of equity with a gift of funds. It is important for the home buyer to talk to their lender and those that are giving that gift should speak with their CPA to make sure they are not unintentionally making a tax or estate planning mistake. A gift is not a loan. A gift is irrevocable. Once delivered and accepted, the person making the gift has no right to ask that the funds be repaid. This will be certified to the lender that the lender will not seek repayment.
If you have any questions about equity, contact Stiles Law by calling (781) 319-1900.
A question came up during our Real Estate class asking, “What is the difference between a nominee and an assignee?” A buyer usually has the right to nominate a nominee to purchase the property. This has no impact on the seller. Common nominees include estate planning revocable trusts, real estate investment trusts, LLCs or corporations. A nominee is ordinarily a related entity to the buyer named in the purchase and sale agreement.
An assignment occurs when the buyer assigns their interest in the purchase and sale agreement to someone else. An assignee is an entirely different person or entity. As a seller, with an assignee, be aware that it may be someone else at the closing. What does that mean? The assignee will “step into the shoes” of the buyer, attend the closing and be bound by the terms of the purchase and sale agreement. The purchase and sale agreement may not permit an assignment without permission of the seller.
Using a nominee can be helpful with estate planning. Buyers who may want to name a nominee should include “or my nominee.” Without this language, a buyer may be forced (depending on the circumstance) to close in your name.
If you have any questions about selling your home or buying a home, contact Stiles Law by calling (781) 319-1900.
A question came in from a viewer this week asking, “Can we reject an offer because the buyer is obtaining financing from the VA?”
You are able to reject an offer from anyone, but why would you want to reject an offer from a veteran? The VA is offering mortgage financing for our veterans and rates and terms are extremely attractive for our veterans. In some cases they are lending up to 100% of the value of the home. If they are receiving 100% financing, that does not make them a weak buyer. It makes the veteran a strong person who is receiving wonderful benefits as they should.
Another misconception is that the appraisal will be difficult. The appraiser will simply be protecting the veteran as they do not want them to get swindled.
Have pride when selling you home. Your home should be in its best condition when it is put on the market. If you’re selling your home and there is something wrong with it, you may want to fix issues that are likely to attract the attention of a VA appraiser and other buyers. You should feel great about selling your home to a veteran!
If you have any questions about selling your home, contact Stiles Law by calling (781) 319-1900.
We received another question from a viewer this week, “I’m selling my home. What costs should I expect to pay?”
The biggest cost a seller should expect when selling their home is the payoff of the mortgage. When notified of an upcoming sale, the mortgage lender will provide a written payoff and this payoff will identify the exact amount that is owed to pay the loan in full. The lender will calculate all outstanding principal, accrued interest, in addition to all other fees and costs.
In addition to the mortgage payoff, sellers should expect the cost of the real estate broker’s commission, ancillary recording costs, tracking and any adjustments for condo fees, fuel, or real estate taxes.
One thing people tend to forget about when selling their home are the Deed Stamps. Deed Stamps are an excise tax and in Massachusetts they are calculated by $4.56 per $1000 of the sale price (except Barnstable County which charges $6.12 per $1000 of the sale price). For example, a home that sells for $500,000 will result in a tax of $2,280.
If you have any questions about selling your home and or your payoff, contact Stiles Law by calling (781) 319-1900.
We received another question from a viewer this week: “Mark, I’m thinking about purchasing a home, but I really need to sell my home. Is it possible to do that?”
Yes, it is. With so many transactions occurring, it is very common that a buyer will make an offer to purchase real estate subject to selling their home first. Most sellers understand that most buyers cannot buy a new home without first selling their current home.
Buyers should be careful to make sure the language in the contingency is very clear. It is not unusual to see accepted offers with home sale contingencies that are unclear and do not protect the buyer.
We recommend drafting the contingency to include language similar to: “The purchase of [property] is specifically subject to the sale of [property] and the receipt of the proceeds from that sale.”
We often see contingencies that provide buyers with a certain amount of time to have their home under agreement. What happens if that transaction goes sour? We like to have a contingency that says the buyer’s obligation to purchase arises only if the buyer’s house has been sold and the proceeds have been received.
If you have any questions about a buying with a contingency, contact Stiles Law by calling (781) 319-1900.