Low Equity? NO Equity?

In Real Estate, We call that Situation UPSIDE-DOWN, and it is NOT a fun place to be, especially when it is YOUR HOME!

The “Low Equity, No Equity” situation is the most common problem we come across with Our Clients

Most people think that Home Equity is a homeowner’s interest in a home. They believe it will increase over time. Well the problem with that thinking is that property values DO NOT always increase, even if you DO  pay down the mortgage loan balance.

The problem with equity is that is it TOTALLY DEPENDENT on what somebody is willing to pay for your home right now, today.

The market has a way of telling us, whether we like it or not, what a house is worth and what is it NOT worth. Usually what we run into is where a homeowner lists with a realtor, and the realtor simply sets the price to high. In order to cover the Realtor’s commissions and closing costs, they usually have to dramatically increase the asking price. Since the price was artificially increased, the likelihood of selling the house is reduced even further.

When the home doesn’t sell, and it won’t when the price is wrong, the listing ends and the house remains unsold. Maybe after that the homeowner has tried to sell their house “for sale by owner” (FSBO) with no luck. Again, the market sets the price.

Even if the house does sell, any equity that does exist is quickly eaten away by the Realtor’s commission, closing costs, taxes and holding costs, leaving the seller responsible for bringing a large check to the closing table.

It doesn’t matter where you live; You don’t have to pay real estate commissions and you don’t have to give away your equity, no matter how small it is, to a Realtor!

We purchase homes from people in situations like this all the time. In most cases we are able to return some of that hard earned equity to the homeowner, or at least reduce the amount of money they have to pull out-of-pocket at closing.

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