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Can my ex-spouse sell his home to me for much less than market value? Say it's value is $500,000, but he sells to me for $350,000. Will a bank lend the 80% on this? Nothing wrong with the house. I was married to him for 17 years. Can't be a gift because we are not related...anylonger at least. I ask because I am somewhat familiar with Fannie Mae guidelines and work in the mortgage industry. Fannie Mae says you have to be related by blood or marriage(not ex marriage) or they must be a fiancé (can't use that because he remarried). Most banks will require you to source the down payment. I can't call it a gift of equity because it's still considered a gift and you have to follow gift guidelines in order to qualify. But I don't see why someone can't sell their home for whatever they like. I had a file about 6 months ago where the buyers were being gifted the equity by their neighbor and because they weren't related, the deal fell through...manager said the loan would be unsalable to Fannie Mae.

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    taxes question need country. Could you edit tags and add country tag
    – Dheer
    Mar 10, 2016 at 16:40
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    Confused by the last sentence. You most certainly can gift things to non-relatives.
    – Joe
    Mar 10, 2016 at 18:08

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There is no need to even tell the bank the difference. You could just declare the remaining 150000 (which he gives you off) as 'your contribution', so you are bringing 150000/500000 = 30 % and you are borrowing 70 %. Which bank would not love that?

Now as said by others, depending on the country you live in, the bank might want to see where you get the 150000 from (and you obviously cannot show anything).

Another option is to buy the house for nominally 480000 or so (avoids the gift tax issue too), and in the contract, declare that 130000 come from non-cash efforts, like you will do services for x years (or did services in the last x years) for him (drive him around, for example); or it is an old interest-free personal loan that he pays you back with it. Who is there to verify if he and you agree and sign that?

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  • I'm not convinced the IRS will believe that last option, despite all the attempts to transfer house ownership for "$1 and other goods and services rendered".
    – keshlam
    Mar 11, 2016 at 11:55
  • @keshlam: You need to be a lot more precise than that. I have done it successfully.
    – Aganju
    Mar 11, 2016 at 19:00
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Should be no problem getting the loan. A bank loves it when the surity is worth much more than they're going to be lending you. You might even be able to borrow 100% without problems or PMI, for that same reason -- if the house has really been appraised at $500k in the current market, buying it at $350k would mean you start with 30% equity.

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  • I'd be curious, what the tax treatment of this is. Since he's selling it at far less than market rate, is it a gift of the difference?
    – Joe
    Mar 10, 2016 at 18:08
  • Tax treatment is certainly a good, but different, question.
    – keshlam
    Mar 10, 2016 at 18:16
  • Well, the OP did include taxes on the question - it seems relevant to 'can he...'.
    – Joe
    Mar 10, 2016 at 18:20
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    The right thing to do would be to declare the $150k value as gift. Form 709. With a lifetime exclusion of well over $5M, there's no tax consequence, just a form.
    – JTP - Apologise to Monica ♦
    Mar 12, 2016 at 22:24

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