Buying a home takes money, usually in the form of down payment along with closing costs. With a gift of equity, one family member can sell their home to another family member and greatly reduce the overall out of pocket costs.

A gift of equity normally occurs between family members. In fact, the IRS will require a letter explaining the relationship between the buyer and seller.

There are tax considerations that are involved with this type of real estate purchase. It is best to talk to a lawyer and accountant to make sure all rules are understood and followed correctly before signing a real estate contract.

For a family that has owned a home for many years and wishes to keep the home in the family, this can be a way to preserve the asset.