How Do I Buy A Home From A Family Member (or Co-Worker, Friend, etc) With Zero Money Out Of Pocket?

hey what's going on uh Christian Carter from radius and today I'm answering a question that I get all the time it's essentially goes something like this um how do I buy my parents home right so the parents are getting ready to downsize uh maybe you know move to Florida or something like that they've got a good amount of equity built up in their home um and they wanna they wanna sell it to their you know to their child um at a good price so how do you buy your parents home it's actually really really really simple so more importantly today we're going to be going over how to buy a home from a family member with zero money out of pocket it's doable and it's actually really quite easy so we're gonna go through two things today hopefully keep it short for you guys um we're gonna go over a quick example and then after the example um we're gonna go out kind of over kind of the steps and how we go about this process right all right um so first of all let's go over the example so and just for just to make it easy let's say that I am buying my parents home so my parents are selling their home to me right so my parents have a home and it's valued at four hundred thousand dollars right so it's worth 400 Grand my parents owe a hundred thousand dollars on the property right that's that's what their mortgage amount is 100 Grand I'm going to buy my parents home for three hundred thousand dollars okay now here's where the no money out of pocket comes in and you can either do this or not do that you can you can do a portion or not a portion it's totally up to you um and the sellers most like you're likely your parents but under this scenario right I want to do a five percent down payment on the purchase price of three hundred thousand dollars so that five percent down payment would be fifteen thousand dollars however I don't want to pay for that out of pocket so my parents are going to give me a gift of equity for fifteen thousand dollars so that covers the down payment so we're good there now we get to closing costs right so there's let's say there's five thousand dollars worth of closing costs again I don't want to um have I don't want to pay any money out of pocket in order to buy this home so my parents are also going to apply a five thousand dollar seller credit right so they're essentially covering the down payment and they're covering my closing costs so I can buy this property um with zero money out of pocket so let's go through the numbers one more time uh sail the home they sell the home to me for three hundred thousand dollars they still owe a hundred grand so let's subtract 100 Grand from the 300 and we get two hundred thousand dollars now we apply the gift of equity so we subtract the 15 grand from 200 Grand we get 185 and then finally we subtract the five thousand dollar seller credit so we come up with one hundred and eighty thousand dollars so those are the cash proceeds so my parents will walk away from this uh deal with a hundred and eighty thousand dollars um in their pocket even though they sold the home for where is it three hundred thousand dollars hope that makes sense also real quick there's no attorney fees um in this equation you're talking I don't know I don't know what the seller attorney fees would be maybe like two thousand dollars uh but that's gonna that's gonna vary attorney by attorney and state by state now let's go through the steps right so how do you actually uh put this into motion right and essentially what we're doing is we're just reverse engineering what we did um on the right side of the board here so the first thing we're going to do is we're going to identify how much cash the sellers want to walk away from the closing table with right so they're going to sell their home how much cash do they want in this example well they my parents wanted a hundred and eighty thousand dollars number two identify how much the sellers want to contribute to the buyer's down payment and closing costs if any and add those together um so real quick nine times out of ten when we're doing these transactions between family members nine times out of ten the sellers the parents will contribute to the buyers the son or daughters uh down payment and closing costs all right so back on track identify how much the sellers want to contribute to the buyer's down payment and closing costs again in this example um the the parents are gonna are gonna contribute five thousand dollars uh to the son or daughter's closing costs and then they're gonna contribute a fifteen thousand dollar gift of equity for the down payment so you just add those together again step one parents want to walk away from the table with 180 grand in cash add the seller credit which is five grand we get to 185 add the gift of equity the down payment which is 15 grand you come up with two hundred thousand dollars step three add the mortgage payoff amount right so we're at right here 200 Grand how much is the mortgage payoff in this example it's a hundred thousand dollars so 200 plus a hundred thousand dollars we get three hundred thousand dollars that's how we reverse engineer to figure out how much we're going to sell the home for step four we're going to draft and sign a purchase and sale um you know again varies state by state but you're probably gonna have to reach out to an attorney uh for this but draft and sign a purchase and sale step five start the mortgage process and then step six final final kind of Step here uh you close on the home there's a lot of stuff that does go on between the mortgage process and closing on the home but that's for another video um but yeah it's really really simple uh buying a home from your parents is not as difficult um as people make it out to be and you can also do it like we showed in this example um you can do it with no money out of pocket which is really really awesome hope you enjoyed this video um reach out to me anytime with any questions or other video topics I love doing these videos I love answering questions and have a great day see ya

Channel: Home Buying with Christian

Views: 1,259

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Id: 8H12_ahUV-c

Length: 6min 13sec (373 seconds)

Published: Fri Apr 21 2023