Would You Let Someone Buy You a Home for Free?

By
Services for Real Estate Pros with HouseHunt.com DRE# 01297932

Crowdfunding is a new way for anyone to gain money online from friends as well as anonymous people who want to help fund their ideas or necessities in life. GoFundMe has taken Americans’ interest in free money and helping those in need to another level. The site allows individuals to sign up, share their plight and need for money from others online, and even provides a safe way for users all over the world to transfer money from their bank accounts to the person who needs the money safely online.

People have gone to crowdfunding sites for expensive-surgery costs, college-tuition costs, and business ventures. These types of crowdfunded endeavors are common, and people enjoy helping those in need. However, what do contributors think about crowdfunded real estate? You may have a client who suggests using a crowdfunding site to help them buy their dream home. This may seem a little strange at first, but if you're in the business of real estate, you're definitely going to see this happening more and more with clients in the coming years.

So what do you think about free, crowdfunded real estate? Do you think it’s a good idea? Do you think it’s irresponsible of you as an agent to allow your client to accept free money from others for a home?

Whether you want your client to use crowdfunding or not, here are the pros and cons of crowdfunded real estate.

Pros of CrowdFunded Real Estate

The pros of crowdfunded real estate are simple: the buyer is able to have peace of mind that they will be able to pay for their home through the help from friends, family, and anonymous donators. The buyer will be able to focus their own income on covering more than just the down payment of the home. The buyer then has the opportunity to afford the monthly payments on the home for themselves and their loved ones' best interests.

Cons of CrowdFunded Real Estate

Lots of people think crowdfunding should only be used for emergencies. Hospital bills/medical care, destroyed homes, or vehicle problems are what most people would be happy to help support. These people do not see the benefits of giving money to others for things that they can handle on their own with time, like college loans, business ventures, and real estate.

Let’s face it: lots of people do not like giving away free money. That’s exactly what crowdfunding is: giving money to someone to spend it on whatever they want.

Is CrowdFunded Real Estate Right for Your Clients?

So is it for your clients? Maybe your client is the type of person who would shun others for using crowdfunding sites to buy a home. Because, after all, buying a home is not necessarily something that deserves an emergency fund or free money from outside individuals. If that's the case, this client will unlikely want to crowdfund the costs of their home online.

However, you may have the type of client who would love free money from others to help them purchase their home. If that’s the case, crowdfunding is right for them. This is not an easy decision to make, and you should cover this topic heavily with your client if they're considering it. Talk it over with them and see if it is a smart move for them to make to afford that beautiful home they've always wanted. Who knows . . . you might end up being one of the online donators who helps them out.

What do YOU think about this recent phenomenon? Have you worked with a client who used crowdfunding?

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Ambassador
1,208,334
Amanda Christiansen
Christiansen Group Realty (260)704-0843 - Fort Wayne, IN
Christiansen Group Realty

The lender will see this as a "gift" and require a gift letter from every person that donated.  If you get enough, you won't even need a loan.  I've had plenty of cash buyers and I never question where the money came from.  It's really none of my business.  

Apr 20, 2015 11:37 PM #18
Rainer
159,917
David Barr
Berkshire Hathaway HomeServices Florida Realty - Sarasota, FL

Donors.

I'd crowfund someone who was making a product or providing I service I could benefit from, or for emergencies.  Not because someone wanted to buy a house they didn't have the money for.

Apr 20, 2015 11:45 PM #19
Rainer
338,318
Ron Tissier
Chapman Hall Premier Realtors (404) 580-9069 - Atlanta, GA
Defining Homes. Defining Lifestyles.

I like this idea, especially for down pymt purposes but doesn't the recipient of the funds have to give something in return to those who donated, i.e. a gift/trinket of some sort, a discount coupon to a restaurant?

Cheers!

 

Apr 20, 2015 11:48 PM #20
Rainmaker
586,345
Eve Alexander
Buyers Broker of Florida - Orlando, FL
Exclusively Representing ONLY Orlando Home Buyers

Oh hell no...

I hope no "crowdfunding" scammer ever calls me to find them a house.

If they can't scrimp, save and take a second job to scrape together a downpayment, they will never be able to pay the mortgage.

Those that are looking for free money to upgrade their life are plain LAZY. I put those moochers in the same catagory as someone who qualifies for welfare by pretending that the neighborhood kids belong to them.

Eve

Apr 20, 2015 11:50 PM #21
Rainer
292,121
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

If you accept CF, that's fine but if a Mortgage is involved then sourcing becomes a topic to know

Apr 21, 2015 12:04 AM #22
Rainer
352,776
Teri Pacitto
Compass - Westlake Village, CA
Real Estate, Your Style...Your Home...My Specialty

Flat out no! This is not a way to buy a home as it's going to be riddled with issues. One who has to beg, borrow and steal has not shown they qualify for home ownership. Wouldn't lenders need to source the down payment as well? Lenders? Would love to hear the take in this. I've seen this tactic to raise money on Facebook and wondered where this all began. Have seen it for everything from a new bicycle to a deposit on a lease property but not to buy a home. I'm interested in reading the lenders comments on this.

Apr 21, 2015 12:08 AM #23
Rainmaker
1,624,112
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Where have I been? I don't think I've ever heard of crowfunding before.  I agree that it is not the agent's business where buyers get their money, but home buying does seem the "wrong" use for this kind of fundraising. 

Apr 21, 2015 12:12 AM #24
Rainer
371,164
Dwight Puntigan
DRP Realty, LLC - Saint Peters, MO
Dwight Puntigan

Never say Never.  I was raised to believe that the value of what you have is determined by the amount of sweat it took to earn it.  Today's world is exposing more situations and issues than I would have ever believed could exist.  It is quite plausable to me that I might be a huge cheerleader for a client with crowd funding.  I have and will continue to discuss outcomes with my clients.

Apr 21, 2015 01:01 AM #25
Rainmaker
638,444
Maria Morton
Platinum Realty - Kansas City, MO
Kansas City Real Estate 816-560-3758

I have heard of people having a crowdfund account for a downpayment on a house as a wedding present. This makes sense to me. The couple could get money they need for a home instead of wedding guests giving buying blenders and chotskys. Also, if well planned, the money could be seasoned in an account owned by the couple so the lender would not need to question those funds.

Apr 21, 2015 01:49 AM #26
Rainer
116,518
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

Crowdfunding could be a real help to some people but like many things it could also lead to scams and dishonesty.  Make sure what you are doing.  Also, a "gift" is a taxable event and that can be an underlying problem with the idea.  I will take a wait and see attitude.

Apr 21, 2015 01:58 AM #27
Rainer
152,699
House Hunt
HouseHunt.com - Huntington Beach, CA

Hi, all!

I am very grateful that all of you have had some great things to say and contribute to this topic. I also find crowdfunding very interesting, however, I have yet to work with a client who has used crowdfunding to gain revenue to buy their home.

 

With that being said, some of you were interested in how the mortgage aspect works. This link goes over how you can get a mortgage with crowdfunding.

As for the lenders, this link goes over how a rule is being put in place to help P-to-P lenders with crowdfunding.

 

Maria Morton was spot on with the crowdfunding for a downpayment as a wedding gift. You can read about the crowdfunded downpayment here.

Again, thank you all for sharing, and I look forward to reading more of what you all have to say about this very interesting and new topic in the real estate world!

Apr 21, 2015 02:27 AM #28
Rainmaker
1,431,803
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

It sounds like begging to me.  I can see it to raise capital for a project or a start up where you are offering a return.  I could even see it for a charity or for very expensive surgery.  I must admit I like it for weddings.  I tell people all the time that couples spend too much on weddings and not enough on the marriage.  Save your money and buy a house.

Apr 21, 2015 02:34 AM #29
Rainmaker
385,510
Elisa Uribe Realtor #01427070
Golden Gate Sotheby's International - Oakland, CA
Opening the Doors to California Homes -East Bay

i have not heard of anyone using croudfunding for buying a house. I usually see it for charities, or kids trying to promote their bands.

Apr 21, 2015 03:12 AM #30
Rainmaker
1,072,462
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Crowd funding is a great resource for someone in dire need. I'm not certain a home fits into that category.  Will they also use crowd funding for utilities and maintenance? 

I know many people who have used crowd funding for new businesses.  It's a great tool for those needing seed money.

Apr 21, 2015 05:05 AM #31
Rainmaker
2,432,999
Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

I have heard of crowdfunding but not for a home.  I think the mortgage lenders would have a major problem with it.

Apr 21, 2015 09:53 AM #32
Ambassador
2,011,382
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Jaime - I haven't dealt with any clients who have done this.  I'm curious how it would work with regards to a loan and if there would have to be gift letters from all.

Apr 21, 2015 04:00 PM #33
Rainer
510,163
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Cash is cash, so as long as you know the source of the cash, it can purchase almost anything except financial services. 

Apr 22, 2015 06:07 PM #34
Rainmaker
589,242
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

Haven't heard of this!  My immediate thought was...what about the lender?  And tracking all that cash could be tricky!

Apr 23, 2015 01:04 AM #35
Rainer
149,198
Theresa Akin
CORPUS CHRISTI REALTY GROUP - Corpus Christi, TX

I have seen crowdfunding for issues that involved hardships such as damage done to a home by fire but causes me to think is this going to be a constant and will they get it accomplished. Guess that makes me a pessimist but have seen often someone is given help due to a fire and it isn't appreciated. Actually, saw it happen a few years back a family lost every thing but would like new or very gently used items. Not like some things from the Goodwill or Salvation Army. One lady took items in a boxes from her garage sale and they were rejected by the famil. They even stated "Didn't you see the TV News as to what we didn't want?"  Well they got little. Be careful not all wishes come true. If people want to give to help those "who appreciate" the crowdfunding and have enough to pay cash and closing. Go for it. It isn't up to us to judge. The only thing I want to see is a statement that shows "PROOF OF FUNDS".

Apr 23, 2015 05:54 AM #36
Rainmaker
1,676,510
Winston Heverly
Winston Realty, Inc. - Atlantis, FL
GRI, ABR, SFR, CDPE, CIAS, PA

Hi, I love your post really hit home, glad I came across it in the archieves. Thanks for sharing.

Apr 29, 2015 12:43 PM #37
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