What is Equity

The Business of Solving Real Estate Problems

Real Estate Exchanging

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Wayne H. Wagie - President

The Wonderful World of Real Estate

Author

If you want to increase your transactions,
Think in terms other than strictly Cash

Equity

Is the market value of a property, minus the amount of liens or encumbrances.

The most common encumbrance is a loan secured by the property, which is usually a mortgage.

There can be more than one loan secured by the property.

Other liens or encumbrances might be unpaid taxes, a mechanics lien, or judgments of some kind, etc.

Example:

$100,000 property with a $65,000 mortgage, subtract the $ 65,000 from the $100,000 and what remains is $35,000, which is the Equity.

Equity in real estate and cash are not the same thing.

(Cash is liquid and Equity is not) While cash goes into the Equity market at full value, Equity comes out into the cash market at a discount.

The more cash you put into a property the less liquid you become.

Example:

You take a property with a market value of $100,000 and pay cash; it is now yours free and clear.

The problem is you have now converted your cash into Equity.

If you would need that cash now, you have to convert your Equity back into cash.

You have a couple of options; you can get a loan, which will not convert, into the same amount of cash.

You could also find a buyer for the property, although finding a buyer willing to pay full cash value for Equity, and to close the transaction may take a considerable amount of time.

One way that you can receive your Equity is in the form of a lump sum.

The seller could receive all cash, or the buyer could obtain a new mortgage and make cash down payment for the balance of the purchase price.

This is called a cash to loan transaction.

If you want to increase your transactions, think in terms other than strictly cash!

Think of the Equity as owned in pieces or in payments.

If you would receive your Equity in pieces, and the lender continues to receive its Equity in payments, everyone with an equitable interest in the property is satisfied.

Pieces go to you the seller for your Equity, and pieces go to the lender, until the equitable interest is fully complied with.

As an Exchangor you know the best way to receive your Equity is by exchanging.

The Equity can be paid with anything that has what you consider to have equal value for your Equity.

In lieu of cash, the Exchangor will receive their Equity for property anywhere, a boat, motor home, a strip mall, stocks, etc.

As an Investor or Agent you will increase your transactions by using any combination of all these ideas, lump sum, pieces or in payments, and exchanging.

To do that, you should help the seller identify their needs, you must uncover the sellers perception of the value of their equity (Remember equity is the owners ego) you need to show the seller that what you have to offer is a fair value in exchange for their equity.

The possibilities are unlimited when you become more flexible in the way you do business, and by increasing your knowledge of exchanging, along with you negotiating skills.

What you can do with Equity

Sell, Exchange, Option, Lease Back, Buy Back, Finance, Create Paper

Questions, comments or suggestions on any of these articles, Send us an

or call Wayne H. Wagie 786-326-4747

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