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What’s a “gift letter” and do I need to worry if my buyers want to use one?

It depends, really, on whether you are selling a condo or a co-op.

A “gift letter” is a letter from a relative of a buyer to a buyer. It states that a set amount of money — and the amount is stated — is being transferred to the buyer for purchase of property at a specific address — and the address is stated.

The letter goes on to say that the money referred to is a gift, not a loan, and that the gift never expects to see it back.

If you’re a buyer, your mortgage broker will give you a copy of a gift letter form that you can have your source of funds — usually parents — fill out.

But back to the seller. If you’re selling a condo, most likely the condo board is only trying to make sure that your buyer has their down payment in hand, and they don’t care where it came from. If you’re selling a co-op, the board will ask for several months’ worth of financial statements, and if the buyer’s assets suddenly increase by $20K the board will want to know where that money came from. A looser co-op board will simply ask to see the gift letter; a tighter condo board will decide that the buyer probably isn’t independent enough, and your sale may not got through.

One of the things your realtor is supposed to be doing for you, while you’re selling, is sniffing your buyers to figure out what their financial status is and whether gift letters are going to be part of the package.

Posted in For Buyers and For Sellers 13 years, 3 months ago at 4:00 pm.

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