Yes, it is true that millennials are moving from their parents’ basements.
CNBC reported that millennials are stepping in to help their families financially. Some of them even buy their parents’ house and take over the mortgage payments.
In some cases, the parents may wish to sell the house to their child for a minimal amount. This can hurt the marketability of the neighborhood and may affect the appraisal value of other homes. What is the solution?
Gift of Equity. According to Fannie Mae, the “gift represents a portion of the seller’s equity in the property, and is transferred to the buyer as a credit in the transaction.” Gift of equity is acceptable for purchases of primary residence and second homes only.
The acceptable donors:
- a relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption or legal guardianship
- a fiancé, fiancée or domestic partner.
- note: the donor may not be, or have any affiliation with, the builder, the developer, the real estate agent or any other interested party to the transaction.
Make sure your clients know their options early so the sellers and buyers in Virginia Beach, Norfolk and Chesapeake are well prepared.