Introduction
Home equity indicates the value of your home that you—the homeowner—control compared to the value that the lender of the mortgage loan on your home controls.
Is this too difficult to understand? Then let me simplify this.
Imagine you owe $200,000 on your mortgage loan. And let’s say your home is worth $290,000. Then you’ll have $90,000 of equity in your home.
Your home equity can go up in two ways. Number one, you build equity as you make monthly payments on your mortgage.
Number two, since home price changes directly affect home equity, your home equity will increase if your home value increases. Vice versa, if your home value decreases, your home equity will also decrease.
Assessing Your Home Value
According to Realtor.com, the median listing home price in Miami is $569,000, and the median sold home price is $495,000.
Assessing the value of your home is the job of a professional valuator.
The market value of your home is determined by the comparable sales (market) approach. Under this method, the values of properties similar to your house are compared by reviewing the previously sold property prices in your neighborhood.
The differences in property size and extra features, such as periphery fences and swimming pools, are accounted for by making the necessary cost adjustments. Also, the rapidly changing market scenario—specifically the high cost of labor and the rising cost of home-building materials—is carefully considered.
All things considered, the market is definitely the greatest determining factor of the price your home can be sold for.
Preparing Your Home for Sale
The most important factor in selling a house with no equity in Miami is to price it correctly.
According to Redfin, the average home in Miami sells after 76 days—in March 2023—on the market. This number was just 56 days last year.
Obviously, in today’s sluggish market, overpricing your home isn’t going to help. Your home might remain on the market for a long time. Or, even worse, it might not sell at all.
Under-pricing your home isn’t a great option either because you’ll not get the best value for your home. So you need to strike a fine balance and arrive at the right price that delivers the best value.
The next step involves getting your house ready for marketing. Complete all the minor repairs, such as fixing squeaky doors, replacing fused bulbs, removing stains on floors and walls, filling cracks in the walls, and clearing clogged drains.
Depending on how much money you’d like to spend on getting your house ready—remember, you already don’t have any equity in it—you can make more replacements. For example, if the cabinets appear worn out, you could install new hardware on them. Likewise, if the appliances in the kitchen are dated, you could purchase new ones. Another low-cost expense is a fresh coat of paint, as it would brighten things up.
The return on investment for major remodeling works, such as upgrades to your bathroom or replacing permanent fixtures with new ones, isn’t high enough to justify the effort involved in the task.
Cleaning, decluttering, and depersonalizing your home will help you prepare it for a quick sale. Take care to conceal all your personal items and family photos.
Advertising Your Home
In today’s internet universe, most home buyers search online to find their homes. Therefore, for most people, viewing professional photographs is a huge step in the search for their dream home.
Once your home is ready, capture professional images of each room. Outsource these images to photo editing services so that potential buyers can visualize themselves living in your home.
Another way to get more looks to your listing is to include a video. A video has immense selling power, and a real estate listing that includes a video gets four times more inquiries (403 percent more, to be precise) than one without a video.
Showing Your Home and Negotiating the Price
The exterior of your home typically determines how a buyer views the interior. Since first impressions can be decisive, the front entrance must be appealing. Next, arrange each room to accentuate the positives. Conceal newspapers, magazines, and toys.
Allow your real estate agent to show your home to the buyer. Try not to hang around. It’s best that you leave because it’s easier for the buyer to get emotionally committed to buying your home. With the current owner “hanging around” their new home, it’s a lot more difficult to become emotional about it. Go into the backyard at least, or go to the nearby store.
When it’s time to negotiate the price, it’s important that you don’t give any indication to the buyer that you’re in a hurry to sell. If the buyer thinks that you want to sell your home quickly, they may decide that you’ll settle for a lower price.
Another important point to remember is not to accept an offer immediately, especially if you’re confident that you’ll receive multiple offers.
Explore Different Ways of Selling Your Home
The cost to sell your home can be significant. It’s not just the minor repairs.
The overall transaction costs include standard closing costs and other charges related to preparing your home for sale, vacating your home and relocating your belongings, real estate agent fees, and giving concessions to the buyer.
In Miami, typical closing costs constitute up to 6 percent commissions to your real estate agent and the buyer’s agent and a further 2 to 4 percent in transfer and property taxes. Other costs include attorney fees and real estate fees such as HOA (Homeowner Association) transfers, title insurance, and escrow fees.
All these costs could easily exceed 10 percent of the selling price of your home. So if you’re not keen on incurring this extra expenditure, you can explore the following three alternatives to selling your home to reduce this cost.
1. Short Sale
A short sale typically means the homeowner owes a higher amount than their home is worth. Hence, only people who have no equity in their homes can opt for a short sale.
However, you should be careful not to make the common mistake that many homeowners do. You should not presume that you can opt for a short sale just because the value of your home has gone down. No, that’s not correct. You can’t opt for a short sale when you have equity in your home.
Let me explain this in greater detail.
Example of When You Have Too Much Equity in Your Home to Opt for a Short Sale:
The market value of your home: $250,000
Payoff your existing mortgage: $200,000
- Costs of sale (@ approximately 10 percent of the sale price): $25,000
- Net Equity:
Market value of your home – (Existing mortgage + Costs of sale)
$250,000 − ($200,000 + $25,000) = $250,000 − $225,000 = $25,000
Example of When You Have No Equity, and You Can Make a Short Sale:
Market value of your home: $250,000
Payoff your existing mortgage: $240,000
- Costs of sale (@ approximately 10 percent of the sale price): $25,000
- Equity Shortage:
Market value of your home – (Existing mortgage + Costs of sale)
$250,000 − ($240,000 + $25,000) = $250,000 − $265,000 = − $15,000
At Home Seller Heaven, we will first consider the equity shortfall in your home. We will then advise you of the most gainful way to sell your house with no equity in Miami, regardless of how you decide to sell.
2. Owner Financing
Owner financing—also termed seller financing—allows a homebuyer to pay for a home without depending on a conventional mortgage. Instead, the homeowner (you) finance the purchase, typically at a higher interest rate than the current mortgage rate and with an option of a balloon payment due after a minimum of five years.
The main advantage of owner financing for you (the seller) is that it simplifies the process of selling a house with no equity in Miami by getting rid of the need for a lender, inspection, and appraisal.
Owner financing works just like a traditional mortgage. For the buyer, it involves making a down payment on your house and paying off the remainder over time.
However, owner financing is usually more expensive than traditional financing. It requires the purchaser to repay or refinance into a traditional loan in around five years. Another advantage of seller financing for the buyer is that it’s much faster and simpler to get when compared to a government-backed mortgage—if you are willing and can provide it.
3. Direct Sale: Sell Your Home to a Professional Buyer (Home Seller Heaven)
The internet has transformed the real estate market, especially in the post-pandemic world. While the competition for houses has shot up, it has also provided more options to homebuyers. As a result, many homeowners are looking favorably at working with property investors.
It’s a win-win situation for both, as the investor is willing to pay cash, and the seller can avoid long and time-consuming transaction chains. Therefore, it’s not a surprise that the most common question these days is, “How do I sell my house to a professional buyer?”
The main benefit of selling a house with no equity in Miami to a professional buyer is that you can make a direct sale with a 100 percent guaranteed closing in just a few days. You can also steer clear of the inconveniences of a short sale or foreclosure.
In a direct sale, you don’t need to make any repairs. You also get to skip the showing process completely.
In Summary
Selling a house with no equity in Miami involves several different costs. The current market is much slower compared to 2021, with few properties being sold at their listed price. The good news is you can work with your lender and avoid foreclosure even when you don’t have any equity in your home. You can also explore the three different options explained in this post.