Pros, Cons and Tax impact of Gift of Equity

[Brian S.]

Hey BP,

I'm in a position to purchase a house in Saint Petersburg Florida from a family member. I am looking at some different ways of buying the property instead of using cash as a down payment. I got a suggestion of using the Gift of Equity method as a down payment. I did some research online and seems this may be an option as long as I am buying this property as my primary home. But is there anything else to look out for in going this route? I think there could be some tax impact to both myself and the seller (family member) and I'd like to avoid that if possible. 

Also, what happens to that equity that is used as the down payment? 

Thanks in advance!

Brian