Equity & Selling a House

The amount of equity you have in your house is a significant factor when deciding if it is a good time to list your house for sale. If you have little or no equity in the property, it is difficult to sell the house for enough to pay off all the property debts and any expenses associated with the sale. The more equity you have in your house, the more flexible you can be when pricing the property or accepting a lower offer from a buyer.


Your house’s equity is the difference between what you owe on the property and its current market value. If your outstanding mortgage loan is $40,000 and there is no other debt against the property, and the house’s current value is $100,000, you have $60,000 in equity. Yet, there is no guarantee you will actually sell the house for $100,000.

Net Sheet

When you list your house with a real estate agent, the agent often prepares a net sheet to calculate the amount of cash you might walk away with after selling the home for a specific amount. The agent deducts expenses associated with the sale, such as escrow fees, commission fees and any outstanding property debt, such as mortgage loans and past due property tax from the sale price, to determine the cash amount to you, the seller. The more equity you have in the property, the larger the cash amount.

Determining Value

While a lender typically requires you to pay an appraisal to determine the value of property before approving a loan, this isn’t necessary when you sell your house. Instead, sellers typical use a comparative market analysis to estimate current market value. This involves averaging the adjusted sale prices of about three comparable homes in your neighborhood, which sold in the last six months. Normally, a real estate licensee will do at no cost, before listing your property.

Short Sale

If you owe more on the house than what it is worth in the current market, you are upside down in his loan. When upside down in a home loan, you have no equity. Selling the house for enough to pay off the outstanding debt is almost impossible. One option is a short sale, where the lender agrees to accept an amount less than the outstanding loan and release the property lien. After a short sale, the lender may forgive the unpaid balance or hold you responsible for the deficit.