Has anyone ever done a deal with a "Gift of Equity"?

[Jeffrey Hill]

Has anyone ever bought a house from a family member using a "Gift of Equity"? I'm in the process of purchasing a house from my father law. He is willing to sell for $225K and we think it would appraise at $300K. Our lender has suggested we do a Gift of Equity to cover the downpayment and closing costs. FIL is skeptical and concerned that it's just a way for the lender to get their hands on the equity but that's not how the lender explained it works. According to the lender, the equity would still be intact and nobody will have to pay a dime in the whole transaction. I mean, at the end of the day we would get a $225K loan from the lender and the house is still worth an assumed $300K which means we still have the equity, correct? Am I missing something here?