My boyfriend is in a bit of a predicament. His parents are either getting divorced or separating, and they want to get rid of their house, we live in CA, so we were wondering what would happen if the parents "gifted" the house to my boyfriend. Would he accumulate all the debt on the house (ie. car loans taken out on the house?, etc.)? Would it be worth taking on all of the rest of the mortgage considering housing prices? We live in the bay area , so it would be better for us to take over the house rather than go out and buy our own which is incredibly expensive. Do you think we should see how much debt has been accumulated? Would he have to pay his parents off if they left or no? Thanks ahead of time, i need any kind of answers i can get. We are going to be talking to a banker soon, but we just want to have some idea about what we should do! THANKS!
2007-10-26 07:43:17 · 6 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
You would be responsible for any outstanding loans on the property regardless of what the money was used for. That is IF the existing mortgage(s) is/are assumable (can be transferred to you)...which is a pretty big "if". Most likely you will have to get a new mortgage to pay off the existing debt. In today's market that may be difficult unless you have good credit and income history.
2007-10-26 07:59:37 · answer #1 · answered by Bald Eagle 5 · 1⤊ 1⤋
In addition to what acermill said, there is also an affect on the "basis" of the property. When real property is gifted, the giftee, or recipient, acquires the givers basis in the property, not the fair market value at the time of the gift. So, for example, if the parents basis in the house for $100,000 then that's your bf's basis. Lets say he sells the house for $600,000 then he has a taxable gain of $500,000.
This example does not consider the IRS primary residence rules
2007-10-26 08:31:17 · answer #2 · answered by Earl 4 · 0⤊ 0⤋
Hi,
It is my understanding that the house must be paid in full before it can be gifted. Depending on the value of the property there may be no taxes charged to either party. That why it's called gifting.
If there is a loan or loans against the property it must be sold so the loans can be satisfied.
2007-10-26 11:40:07 · answer #3 · answered by skiingstowe 6 · 0⤊ 0⤋
If the parents 'gift' the house to the BF, you will have a house which comes along with the mortgage lien(s) attached to it. If the parents default on payments, the house will be foreclosed by the lender(s) involved.
Furthermore (as an example) if the parents gift to the BF a house worth $400,000 and they owe $200,000 on it, the parents will incur a gift tax, since they can only gift to their son $12,000 in cash or equivalent value annually without incurring said tax.
Both of you need to seek qualified legal advice on this situation before you do anything further.
2007-10-26 07:56:06 · answer #4 · answered by acermill 7 · 2⤊ 3⤋
if it has a mortgage - the parents just can't give that away - the bank won't allow it - they should sell the house and divide the net equity between them and then each can do what they want with their share of the cash, plus any "gift" over 12000 in a calendar year - the parents would gave to pay gift tax on
2007-10-26 08:00:15 · answer #5 · answered by Anonymous · 1⤊ 2⤋
honestly, this does not concern you. Although you are in the picture, it is a decision for the family. This may not be what you want to hear...sorry. This is a family matter and it might be in your best interest to let them decide...the parents may get mad at their son for letting you influence his decision of what to do.
2007-10-26 07:47:36 · answer #6 · answered by Anonymous · 0⤊ 2⤋