14 Options to prevent foreclosure
Gift Of Equity / Deed Transfer
Sell your home to a family member below market value using your equity as down payment.
Sell Your Home to a Family Member Without Cash Using the Equity You Already Have
What Is a Gift of Equity?
A Gift of Equity is when you sell your home to a family member for less than its full market value, and the difference (the “gift”) is used as the down payment for their mortgage. No cash changes hands between buyer and seller—the equity in your home becomes their down payment.
This option is especially powerful for homeowners facing foreclosure who want to:
- Keep the property in the family
- Avoid public auction
- Help a child, grandchild, or other relative become a homeowner
Who Should Consider This Option?
A Gift of Equity / Deed Transfer is ideal for:
- Homeowners with at least 25%–40% equity
- Families who want to keep the home in the family
- Situations where the relative buyer has income, but no cash for a down payment
- Homeowners who are in foreclosure but have a family member willing to help
- Sellers who are okay transferring the home for less than market value
How It Works: Step-by-Step
- Family member applies for a mortgage with an FHA-approved lender (FHA, Conventional, or VA).
- The home is appraised to determine the market value.
- You agree to sell the home for less than appraised value (example: home is worth $400,000, you sell for $360,000).
- The $40,000 difference becomes a “gift of equity” and counts as the buyer’s down payment.
- Escrow and title process the sale like any normal transaction.
- Your loan is paid off through the sale, foreclosure is stopped, and the family member becomes the new owner.
Benefits of a Gift of Equity
- Keeps the home in the family
- Stops foreclosure through a verified sale
- No cash needed from the buyer
- FHA and Conventional loan programs allow this structure
- A great way to preserve generational homeownership
- Avoids public auction or investor buyout
Considerations & Risks
- The buyer (family member) must still qualify for a mortgage based on income and credit
- Must be a formal sale through escrow and title—not just a quitclaim or handshake
- You’ll likely need to sign a gift letter verifying no repayment is expected
- Only close relatives qualify for FHA gift of equity: child, grandchild, parent, grandparent, sibling, etc.
What You’ll Need to Apply
- Property appraisal
- Mortgage payoff amount
- Signed purchase contract
- Gift letter (provided by the lender)
- Buyer’s mortgage pre-approval
- Escrow and title company to process the sale
Timeline
- Loan pre-approval for the buyer: 3–7 days
- Appraisal and underwriting: 10–20 days
- Escrow closing: 30–45 days on average
- Foreclosure can be delayed or canceled once escrow opens with proof of sale
Real Example
Mr. Alvarez was 3 months from foreclosure with $130,000 left on his loan. His son, who had steady income but no down payment, bought the house using a $50,000 gift of equity. The son was approved for an FHA loan, paid nothing out of pocket, and saved the family home.
Frequently Asked Questions
Q: Can I just add my relative to the deed instead of selling it?
🅰️ No. That doesn’t solve the loan default or stop foreclosure. You need a real sale with the loan paid off.
Q: Can the buyer be a friend instead of family?
🅰️ Only close family members qualify for FHA/Conventional gift of equity programs. Friends are not eligible.
Q: Will I owe taxes or fees on the gift?
🅰️ Possibly. Any gift over the federal threshold (currently $18,000 in 2025) may require a gift tax disclosure, but most transfers don’t result in owed taxes if structured properly.
Need Help Structuring a Family Sale?
We help families:
- Qualify for gift of equity financin
- Draft and review gift letter
- Work with FHA lenders and appraisers
- Handle escrow and stop the foreclosure sale