If you are the average homeowner or investor, you will lose 80% or more of the equity in your property when you sell!We will show you why and what you can do to prevent it.The National Association of Realtors reports that their sellers discount their properties an average of 9% in negotiations with prospective buyers.Take off another 5-7% for the broker’s commission.Add an additional 3% for the carrying costs, mortgage, taxes, maintenance etc. over the 60-120 days between listing the property and the closing of the sale.That’s if you are one of the lucky people to actually have your property sell this quickly.
I’ve met sellers that have not had even 1 offer in over a full year of trying to sell their property with and without an agent.Finally subtract another 2% for seller’s closing costs and you will see that approximately 20% of your property’s market value is ripped off in the selling process.If you are the average homeowner with 25% or less equity in your property, that 20% of the property’s value equals 80% of your home’s equity.Instead of walking away with $25,000 on the sale of your $100,000 property with a 25% equity, you will be lucky to net $5,000 at the closing; Ouch!OK, Slick, I hear you; you sold without a realtor, you walk with about $11,000!This comes as an unexpected and unwanted shock to most sellers.
The consequences of having so much of your equity wiped out by the sale can mean more than the loss of the money, as much as that hurts.If you have purchased your property or refinanced it recently, it is likely that you have less than 25% equity in it.You are in a precarious position.If you were forced to sell your property for personal or financial reasons, you would be trapped because you would not be able to sell it without digging into your life savings to bring cash to the closing.Let’s say your property was worth $200,000 and you owed $180,000.Damn, that’s $20,000 in equity, not bad for a property you just purchased!Or is it?If you sold the property the traditional way, you would have to BRING $20,000 in cash to the closing to buy your way out of that property!If you did not have 20 Grand in your piggy bank, you would be trapped in that property.
If you were facing foreclosure, as a record number of middle class families are today, you would have to go down with the ship.Down into a financial quagmire that would probably haunt you for years to come and thousands more dollars, even after the bank threw you and your family out of the house! (See our article, “Foreclosure Dangers”).One way to avoid this predicament is to NEVER “Payoff your high interest credit cards” with a HELOC (Home Equity Line of Credit) or with a refinance of your mortgage, no matter what Suzi Ormand says!You are putting your family’s home in extreme jeopardy by both decreasing your equity; your financial cushion in your home, while piling on debt to your home that cannot be removed with bankruptcy as credit card debt can.
The banks love it when you do that.Your best bet, if you don’t want to lose 80% of the equity in your home when you sell, is to find a lawyer or other real estate professional that can help you set up an Illinois Land Trust.The trust will allow you to sell in a manner that will avoid 90% of the costs associated with a conventional sale, letting you net Hundreds of times more cash at closing!