We have the seller of a piece of property (Prop #1)who took out an equity loan on Prop #2 to assist the buyer of Prop #1 in purchasing the property.

The required use of proceeds of the equity loan on Prop #2 was used to pay down (not all) of the balance of the mortgage the seller currently had with us on Prop #1 and do improvements to Prop #1 so that the buyer of Prop #1 will purchase the property and payoff the remaining balance of the sellers loan on Prop #1 with the closing proceeds from the loan the buyer will be taking out with the purchase of Prop #1 .

Is the equity loan the seller will be taking out-reportable? And if so-as what?

Thank you.

The loan on Prop #2 to the seller of Prop #1 is not reportable. It is a "gift" loan to the buyer of Prop #1. It does not meet the definition of a home purchase therefore it is not a home purchase loan for either the seller of Prop #1 or the buyer of Prop #2.

So it wouldn't be a home improvement-since part of the funds will be used to complete improvements on the property being sold? I don't see where the loan for improvements has to be on the same dwelling being improved.

I missed the improvement portion of the post. However, if this is a temporary loan that will be paid with the proceeds of the sale from the buyer of Prop #1 it still would not be reportable.