What is a Gift of Equity?  A gift of equity is the sale of a home made to a family member or someone with whom the seller has had a previous relationship, at a price below the current market value. The difference between the actual sales price and the market value of the home is called the gift of equity because the sales price is so much lower than the real market price of the home. Most lenders allow the gift to count as a down payment on the home.

BREAKING DOWN Gift of Equity: A gift of equity requires a gift of equity letter that is signed by both the seller and the buyer. The seller must have an official, paid appraisal completed on their home, noting the appraised value of the home with the price they will be selling for, and recording the difference as the gift of equity on the official paperwork. There will need to be the gift equity paperwork, as well as a second settlement letter noting gift at closing.

A gift of equity can have tax consequences, as it could impact the asset's cost basis for the new homeowner and have capital gains implications for the seller. Additionally, a considerable sale can affect the local real estate market. If a house sells for considerably less than others with comparable features, it may negatively impact other home sales in that price point or area. However, it may be possible for the sale to be done privately or off-market to avoid that complication. The gifters must also follow IRS guidelines for gifts of monetary value, up to $28,000 per couple or $14,000 for an individual per year.

Example of a Gift of Equity:  An example of a gift of equity may be a set of parents who wish to sell their home to their children at a price that they wish to name, rather than going through a real estate office that would demand a certain price for market purposes. The parents would name a price that they agreed on and “sell” the house to their children for that amount, despite the fact that the house is actually worth a lot more. Or, a gift of equity might occur if the individual or persons selling a home want to help the buyer complete the sale by essentially lowering the price of the home in order for the buyer to reach the down payment requirements. A lender can consider the gift of equity as the twenty percent, or other amount required, to complete the sale.

You avoid mortgage insurance if the loan amount is 80% of property value or less. Lenders will accept your parent’s gift of equity of $50,000 as the equivalent of a cash down payment, provided that they are satisfied that the house is really worth $200,000. They will use the appraised value  because the sale price was set within the family rather than through arms-length bargaining.  Gift taxes should not be a problem. Taxable gifts are those to one recipient in excess of $14,000 per year. (Gift recipients never pay taxes on gifts). If you are married and have at least one child, each of your parents could gift each of the three of you $14,000 a year, or $84,000 in all, without it being taxable. If you are married but have no children, you are still OK because your parents can give you and your wife $56,000 in non-taxable gifts in any one year. 

In cases where the gift exceeds the gift tax exemption, part of the gift would be taxable, but your parents don’t pay taxes on it. They must report it on IRS Form 709, and it will be deducted from their “unified credit” , which is the total amount of credit against gifts allowed during their lifetime free of tax. This credit in 2016 was $5.45 million.

GOOD FUNDS:  ARIZONA’S “GOOD FUNDS” LAW:  Arizona law requires that escrow agents not disburse money from an escrow account until funds related to the transaction have been deposited and are available.

Pioneer Title Good Funds Table:

GROUP HOME:  (From Mary Francis Coleman) Q: CAN SELLER DISCLOSE A GROUP HOME OR SOME OTHER TYPE OF HOME?  (IE, MENTAL HEALTH, DRUG/ALCOHOL TREATMENT, DISABLED, ETC). A:  Yes.  These all require business licenses and some may also require other types of professional licenses and would all be considered part of the public record. (No Exemptions).



HAFA Affidavit form required by the U.S. Treasury  (See “Arms Length Transaction”)  Agent is not allowed to receive compensation if he/she is also the Buyer. 

5/28/2013:   Part of the Federal Government's Making Home Affordable (MHA) program, the Home Affordable Foreclosure Alternatives (HAFA) program was developed to give homeowners a way to settle their mortgage debt without going through a foreclosure. The buyer and seller of a HAFA Short Sale will now be required to fully execute the HAFA Affidavit prior to and as a condition of closing.


The HAFA Affidavit form certifies: 1) an arms-length transaction; this is the sale of a property in which the buyer and the seller have no existing relationship (they're not family members, friends, business associates, etc.), and are acting in their own self-interest and are under no undue influence or pressure from other parties., and 2) that no money is being given or received that is not reflected on the HUD-1 Settlement Statement.

The HAFA Affidavit will also include an agreement that there are no other agreements, understandings, contracts or offers related to the current or subsequent sale of the property.  

HAPPY BIRTHDAY:  “Contrary to any language otherwise, either on your birth certificate or drivers license, you are now one year older.”

HARD MONEY LOAN:  I would write on page 8, something like:  1)  This is a hard money loan.  Section 2 Financing contingencies shall apply.  OR  2)  This is a hard money loan to be treated as an "All Cash" Sale.  Section 2 Financing contingencies shall not apply.

HARD MONEY LENDERS (HMLs) are typically private individuals or small groups that lend money (Hard money) based on the property you are buying, and not on your credit score. Usually these loans cost (percentage-wise) much more then an average mortgage, often times up to twice what a regular mortgage does, plus high origination fees.

HAULED WATER:  No Domestic water well addendum required.  Hard to get financing, specialty lender, is hauled water common to the area?

HELOC FINANCING:  CASH, SOURCE OF FUNDS IS REFI/HELOC:  Page one of PC:  $xx price, $xx earnest money, $xx cash on or before COE (see additional terms and conditions). 


On page 8 write something like:  Source of Funds:  This purchase agreement is contingent upon the successful refinance/HELOC for the buyers property located at 123 Main St, Tempe, AZ.  Refinance/HELOC shall be completed and funds made available to buyer (or funds deposited with escrow) no later than 3 days prior to close of escrow.  Financing Contingencies in this purchase contract, section 2, line #’s xx-xx, shall not apply.  Buyers preliminary refinancing/HELOC Lender approval letter is attached.”  OR


Q: I spoke to you about a contract question on Friday the 23rd I believe. It was regarding a client who is writing an offer but needs funds from two HELOCs as the down payment source.   Line 12: *See page 8 for source of additional down payment     Page 8 lines 346-353: *Source of buyer's additional down payment to be from new equity lines of credit on two existing properties owned by buyer. This purchase contract is thus contingent on buyer successfully refinancing both properties and having access to necessary funds through the equity lines of credit. Buyer will deliver to seller confirmation of successful refinances no later than December 26, 2018. Buyer may elect to cancel this contract and receive his earnest money if for any reason he is unable to successfully refinance both properties by the date specified.


HIGHEST AND BEST OFFER  (Send via email, could also ask for response on counter offer form).

“Good morning.  The owner has received multiple offers for the property located at 123 Main Street, Tempe, Az. He/She would like to extend an option to all parties to improve their original offer to a new highest and best net offer to the seller before x:00pm, MST, xx/xx/xxxx.  If interested, please submit an addendum to your offer including any new price and/or terms with a seller acceptance time of x:00pm MST that same day.”

I have 2 offers on my listing and the Sellers want to send a multiple offer to each of them. I haven't done a multiple offer so do I just write "Please send your highest and best offer " on the Multiple offer form itself, or is there a counter-offer that is supposed to go with the multiple counter offer?  Please advise. 

       If you're just asking for the highest and best from these Buyers, you would simply email both agents.  You'd say something like

"Thank you for your offer.  I wanted to let you know that we've received multiple offers for this property and my Seller is requesting an addendum with your Buyers highest and best offer by no later than xpm on xx/xx/xxx.  If we do not receive an addendum from you prior to that time, your offer will be considered as it is currently written.” 

The only time you would do a Multiple Counter Offer is if you're asking the Buyer to change specific terms.  In this case, with a highest and best request, you're simply asking them to update their offer.


HOA NON-DECLARANT TRANSFER FEE:  Also see HOA Non-Declarant Escrow Transfer Fee form in doc’s tab, aaronline hotline section

HOA TRANSFER FEE:  HOA Transfer Fee:  $400 Max   

ARS: 33-1806 (C)      Resale of units; information required; fees; civil penalty; definition

HOA VIOLATION ADDENDUM  LANGUAGE:  As addressed in the Dove Valley Ranch Community association resale demand letter of December 5, 2018, Seller agrees to replace weathered wood slats on yard gate in accordance with HOA requirements.  Paid receipts evidencing the repair shall be provided to buyer three (3) days prior to COE date.  Any related assessments, liens or fees shall be paid by the seller.

HOA VIOLATION DURING ESCROW:  See changes during escrow, get updated SPDS, send CURE notice if necessary, Addendum, Holdback,  etc.


HOA ViolationCASE STUDY: Transaction is in escrow.  HOA violation (Paint, Landscaping, Architectural, etc) notice surfaces.  Seller must update the SPDS!  (Demand this).  Buyer has 5 days to disapprove!  IF SELLER REFUSES TO UPDATE THE SPDS WITHIN A “REASONABLE” TIME, DELIVER A CURE NOTICE TO THE SELLER STATING:  “Seller has failed to update the SPDS regarding the change in/and/or/describe_______________  as required in the purchase contract, see section 6j, “Changes During Escrow”....(Also, consider the language “or otherwise”.  ie, Laurie would say a “receipt” or “invoice” or “statement” would be considered as “otherwise” disclosures (these are “PROOF”).


HOA VIOLATION DURING ESCROW:  Q: We represent the buyer and we just received the HOA disclosure.  It shows that the owner has a violation on the property. What's the proper process to get that resolved with the Seller?  What kind of written notice needs to be given?  

A: You should notify the listing agent that the purchase contract says the seller now must deliver to you an updated SPDS with this new information. (See page 2 of SPDS, around line #32).  Also see section 4f of the purchase contract, "Changes During Escrow".   This is material information that must be formally disclosed to the buyer.  If they fail to update the SPDS, you could send them a CURE notice.  An updated SPDS gives the buyer 5 days to disapprove.  A CURE notice gives the seller 3 days to resolve the CURE or the buyer could cancel.  Either way, it will give you the leverage to negotiate a favorable resolution to the HOA violation.  Language:  Seller to ensure that HOA compliance issue with (xyz, painting, landscaping, etc) is resolved and agrees to provide buyer with documentation from the HOA showing that they have removed the violation no later that five (5) days prior to close of escrow.”

HOA ADDENDUM NOT AVAILABLE PRIOR TO SUBMITTING OFFER LANGUAGE  "This contract is contingent upon the Seller completing and delivering page 1 of the HOA Addendum to the Buyer, and the parties agreeing to the subsequent terms completed on page 3 of the HOA Addendum within 5 days of contract acceptance.  In the event the terms of the HOA Addendum are not agreed to within 5 days of contract acceptance, the Buyer may cancel this contract during the inspection period with a refund of the earnest money."

HOA CANCELLATION (ALSO SEE CANCEL, HOA):  The buyer has given instructions to cancel the transaction due to their disapproval of the HOA Disclosures.  Page two of the HOA Addendum, specifically lines #42-43 state that the buyer is allowed five days after receipt to disapprove.  There is no need for a "mutual cancellation" since the contract gives the buyer the unilateral right to cancel for multiple/various reasons, which could include cloud on title, SPDS, Insurance Claims History, BINSR, HOA Disclosures, etc, etc.  The buyer has given their lawful instructions to cancel, the title company should follow those instructions.  The earnest money should also then be released back to the buyer for these same reasons.

HOA CANCELLATION:  Loan Denial due to litigation.  Use unfulfilled loan contingency notice.

HOLDBACK AT ESCROW:  “Seller and Buyer Agree to Close Escrow with incomplete repairs.  Seller & Buyer further Acknowledge and Agree that a “Holdback Account” will be established and $x will be withheld  from Seller’s proceeds by Title Coompany.  Funds will be made payable to xyz company (or vendor or seller or and/or nominee named before COE) for the following repairs as agreed in the BINSR.  LIST:  xx, xx, xx, xx.  Repairs to be completed no later than xx/xx/xxxx.  If repairs are not completed by agreed upon date, the balance of any funds remaining unused in the “Holdback Account” to be immediately released to buyer.”  

HOLD HARMLESS (EXAMPLE):  "Should Buyer/Seller waive the SPDS (or xxxx), Buyer does so against the advice of HomeSmart.  Buyer agrees to defend, indemnify and hold harmless HomeSmart, it’s Designated Broker and Agent of Record against any and all claims that may be made regarding the property (or xxxx) and its condition."  BUYER/SELLER IS HEREBY ADVISED TO SEEK LEGAL, TAX AND ANY OTHER PROFESSIONAL ADVICE DESIRED BY CLIENT.”   OR   


“Seller and Buyer acknowledge and agree that (Buyer or ___) is hereby indemnified and shall be held harmless from any and all liability regarding home repair contractors and their scope of work at 123 Main Street, Phoenix, AZ.” 


HOLD HARMLESS, INDEMNIFICATION:  "Buyer agrees to close escrow and accepts the property in it's present physical condition without the Southwest Gas utilities installed.  Seller & Buyer acknowledge and agree that Buyer will assume all responsibility for having said gas utilities and all related equipment installed after close of escrow, and Buyer agrees to indemnify and hold harmless Seller and both brokerages of record regarding gas utilities."


HOLD HARMLESS (OR WAIVER OF CONTRACT PROVISION(S):  "Should Buyer/Seller waive the SPDS (or xxxx), Buyer does so against the advice of HomeSmart.  Buyer agrees to defend, indemnify and hold harmless HomeSmart, it’s Designated Broker and Agent of Record against any and all claims that may be made regarding the property (or xxxx) and its condition."  BUYER/SELLER IS HEREBY ADVISED TO SEEK LEGAL, TAX AND ANY OTHER PROFESSIONAL ADVICE DESIRED BY CLIENT.”  


HOME WARRANTY TRANSFER:  Seller to transfer current Home Warranty at no cost to buyer.  Current Home Warranty is issued to ____.  Expiration date is xx/xx/xxxx.  Buyer to contact x at 123-4567 or for more information.”

HOMESMART FEES:  Hello Jerry, I was informed that you will not be taking commission for the file above and will be paying the HomeSmart fees on your own. In order to pay the fees of $300 to HomeSmart you will need to write a check to the title company so they can pay us.  Title Co Commission Instructions should read $300 to HomeSmart to cover your transaction fee’s, please have them correct to show $300 to HomeSmart.

Please let us know if you have any further questions.  Thank you, Jessica

HOMESMART FILES:  Agents will not be paid their commissions if the documentation in the transaction file is incomplete.  Further, HomeSmart file requirements are in full compliance with ADRE rules.


Both agents are HomeSmart, Listing file is complete, buyers agent is delinquent with paperwork on the sale file.  Please release Listing Agent's commission check to listing agent Valerie Cox.  I have copied her on this email.

HOMESMART PHONE NUMBERS:  (Below):  Firm state license #LC506032000   Broker MLS Code, Corporate CRIL01

Consulting Brokers Line 602-889-2115 / 

Trudy Moore 602.889.2110 /           Laurie McDonnell 602.889.2245 /


Jeff Tallman 602.889.2114 /           Maxine Frutkin 602.889.2122 /

Kyle Fouts 602.889.2113 /                 Kristin Armbruster 602.889.2116 /

Jennifer Ridenour 602-889-0000 /



INJURY TO BUYER WHILE SHOWING HOMES:  Kim Panazzo's husband was showing property to a buyer yesterday.  The buyer fell off the lip of the garage floor. Took a tumble.  Said her elbow hurt a bit, but they went on and actually looked at another house after that one.  Today, the buyer sent them a text saying her elbow is broken and she's flying home for emergency surgery on it.  What are our next steps?  Listing agent has not been informed yet of what happened.


Unless the buyer is asking us for money or something - probably just say - good luck with surgery.  Any claim wold be against the seller's homeowner's insurance.  Kim should probably let the listing agent know what happened.