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Yes, but do they know what the property is really worth? Have you told them that you think it is worth ~$500k? They've named their bottom line - doesn't mean you have to gravitate towards it if you know the top line is alot higher. Imagine a situation where a real estate agent...

I don't have an issue with the discount, or even the size of the discount as long as all parties to the transaction are fully aware of what is going on and know that the property is being transacted at a discount. Parents help their kids out all the time financially, so there is nothing new...

Ethics.... Do they know what sort of discount they're offering to you? Are they aware of both it's true market value (in your estimation) and what you propose to pay them for it?