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Tax Rules for Gifting Real Estate

Friday, January 8, 2016
by The Hat Team

gift house

Did you give the gift of real estate this holiday? If so, you need to be sure to abide by the tax rules that are associated with giving such a large gift. 

  • It may be a good idea to give the cash for your loved one to purchase a house instead of purchasing a house for them.  You may think you know your relative or friend better than anyone but you may not know all their secret hopes and dreams because they may not tell you every little detail about themselves.  If you give cash to your loved one to buy a home you need to keep the amount at $14,000 or less.  The gift tax limit for a yearly gift called the annual exclusion allows you to give $14,000 cash or less to as many folks as you would like each year tax free.
  • Another great way to give the gift of real estate without disobeying any tax rules is to give the gift of a cash down payment. You will want to make sure that the loan officer knows that this is a gift and not a loan.  You will need to fill out the appropriate paperwork so that the fact that the down payment monies is a gift will be well clarified, otherwise you risk your friend or loved one losing out on getting their mortgage. 
  • If you would like to sell your children’s childhood home to them you may do so but be sure that you are careful how you do it.  Seller financing your home to your children is a great way to avoid being taxed to the max.  In this type of sale you basically will be given a small down payment and you will hold the note on the property.  This type of real estate gifting is great as long as you can trust your loved one to pay down the mortgage. 
  • Selling your home to your loved one at a low ball price is another way to give the gift of real estate all the while abiding by tax rules.  Of course the IRS may think you are crazy but once they see you are selling to a family member they will understand. 

Remember if you do decide to give the gift of real estate to abide by the tax rules and regulations and you will be sure to have some excited recipients! 

Courtesy of Montgomery AL Real Estate Expert Sandra Nickel!

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Midtown Montgomery Market Trends - Dec 2012

Friday, December 21, 2012
by The Hat Team

With the gift-giving season in full swing, some parents are considering a sizable and meaningful present for their children and/or grandchildren - real estate. This is the sign of a solid trend, with a growing number of parents are currently helping their children purchase homes, whether they’re buying these homes for their sons and daughters outright, helping them pay for closing costs, or coming up with the money for their down payments.

While such a gift is certainly in keeping with the spirit of the season, those who are giving or those relying on monetary donations from their parents or family members to buy real estate should follow some fairly simple underwriting and IRS rules.

  • You can gift a total of $13,000 a person without being taxed on that money.
  • The person giving the gift must file a form 709 (gift tax return) for any gifts over $13,000 per year per recipient.
  • Buyers applying for a conventional mortgage loan must use their own funds for at least 5 percent of their down payment.
  • When buyers are providing a down payment of at least 20 percent of their home’s purchase price, they can rely on gift funds for the entire down payment.
  • Mortgage lenders will need to see documentation showing the origin of gifted funds.
  • A gift of real property is accomplished through a deed. A warranty or grant deed is normally used, but in some cases a quitclaim deed may be appropriate. You will identify the property being transferred and sign, notarize, and register the deed as clear evidence that the property has been given to your children.

As with all major financial decisions, you would be wise to consult your accountant and/or tax attorney before gifting monetary assistance for the purchase of real estate or the property itself.

Take a look at sales figures in our local real estate market for November. Unfortunately, Midtown Montgomery has yet to "jump on the upswing bandwagon." Our numbers continue to disappoint.

Midtown Montgomery real estate sales statistics for November show the number of homes sold decreased by 90% when compared to November 2011. The average sales price increased by 23% to $156,890 during the same period. The median sales prices increased by 14%, and market times increased by 19% or 31 days. The highest selling home price decreased by 27%, and the lowest selling home price was the same.

Midtown Montgomery Nov 2012 Nov 2011
Homes Sold 37 366
Average Selling Price $ 156,890 $ 117,500
Median Selling Price $ 117,500 $ 101,250
Days On The Market 163 132
Highest Selling Price $ 575,000 $ 785,000
Lowest Selling Price $ 3,000 $3,000


The good news is that the level of buyer activity in the Midtown Montgomery market is up substantially, which may mean and upturn ahead.

For the latest Midtown Montgomery real estate market conditions in your area, please call me at 800-HAT-LADY or visit HomesForSaleInMontgomeryAlabama.com.

Information is provided by the Montgomery Area Association of Realtors and is deemed accurate but not guaranteed.

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