Understanding how much a seller owes relative to their home's value - and why it matters for deal structuring.
Loan-to-Value (LTV) is the percentage of a property's value that is owed on mortgages. It tells you how much equity the seller has and what deal options are available.
LTV = (Loan Balance ÷ Property Value) × 100
Low LTV (Good Equity)
Loan: $80,000
Value: $200,000
LTV: 40%
Seller has $120K equity!
High LTV (Low Equity)
Loan: $180,000
Value: $200,000
LTV: 90%
Only $20K equity - tight deal
Lots of equity! Standard wholesale deal works great. Seller has room to sell at a discount and still walk away with cash. Often inherited or long-term owners.
Moderate equity. Deal may work but margins are tighter. Need accurate ARV and repair estimates. May need to be creative on price.
Low equity. May need subject-to or seller financing. Cash deal unlikely unless super distressed property. Ask about mortgage details.
Negative equity - they owe more than it's worth. Short sale or subject-to only. Requires lender approval or advanced strategies. Skip unless experienced.
LTV tells you what's possible. Low LTV = easy wholesale deal. High LTV = get creative or move on. Always ask about the mortgage early in your conversation.