You've decide to sell your home, and your agent has suggested a price of
$165,000. Your remaining mortgage balance is $114,000. The costs
associated with selling and closing the transaction are $12,600. If all
goes as planned, your equity at closing will be approximately $38,400. Now
- keep an eye on your equity.
Several situations may arise during the sale process which can reduce your
equity substantially. The most common is a low purchase offer. If the
offer is 4% less than your asking price, the price would be $158,400, or
just $6,600 less than you expected. Or, is it?
Keep in mind that the reduction in price comes straight off you equity.
You had anticipated $38400, which now becomes $31,800 - a whopping 18%
less than expected. But wait, there's another less obvious situation which
can reduce your equity even more.
Some buyers may offer "full price" while asking that you pay their loan
related closing costs. These costs are difficult to calculate. It's easy
to congratulate yourself for selling at full price. As your representative
to explain the impact on your equity before accepting. If closing costs
amount to 6%, your equity could drop to $28,500 - a full 25% reduction.
Depend on your agent to provide a detailed accounting of your net proceeds
from each offer. It could protect your valuable equity.
