Gift of Equity

A gift of equity involves the sale of a residence to a family member or someone with whom the seller has a close relationship, at a price below the current market value. The difference between the actual sales price and the market value of the home is the actual gift of equity. The process derives its name from the fact that the sales price is so much lower than the real market price of the home. The transfer counts as a present or giveaway due to the difference in value, but no physical money changes hands.