The foundation of every real estate deal starts with understanding equity.
Equity is the difference between what a property is worth (market value) and what is owed on it (mortgage balance).
Property Value - Mortgage Owed = Equity
This homeowner has $100,000 in equity they can access through selling or refinancing.
Understanding a seller's equity position tells you:
Sellers need enough equity to cover closing costs, our fee, and walk away with something.
High equity = more room for profit. Low equity = tighter deal or creative financing needed.
"Underwater" means they owe MORE than the home is worth (negative equity). Requires special strategies.
Sellers with lots of equity can afford to wait. Sellers with low equity often need to sell NOW.
Equity is the "meat" in a deal. The more equity a seller has, the more flexibility you have to structure a profitable offer. Always calculate equity before making any offer.