Introduction
If you plan well, home equity can easily be your greatest financial asset. However, while home equity can be the biggest chunk of your personal wealth, some unexpected setbacks can also undermine it fast.
In accountant jargon, home equity is the difference between the current market value of your home and the total loans against your home.
For instance, if the market value of your home is $350,000, and you have a mortgage balance of $300,000, your home equity is $50,000.
However, if the market value of your home slips to $290,000 in a few months, and the mortgage balance is also equal to this amount, then your home equity is zero.
Home equity is definitely a driving force in building wealth. So, it can be disheartening if you have to sell your house before you can build any equity.
The following are some factors that can affect your home equity negatively:
- The condition of your home
- A dip in the value of comparable properties
- Excess supply of homes in the neighborhood
- Decrease in neighborhood appeal
Other than the first factor, you have no control over the others. So, when selling a house with no equity in Fort Lauderdale, you might easily end up in an unfavorable situation. And it can even leave you owing money at the closing table.
Read on as we delve into selling a house with no equity in Fort Lauderdale.
Overview of the Market in Fort Lauderdale
The housing market in Fort Lauderdale has cooled considerably since it hit an all-time high (median sale price: $597,750) in March 2022.
But the good news is, according to Redfin.com, home prices in Fort Lauderdale were up a whopping 14.1 percent in April 2023 compared to last year. The median sale price of a home is $545K.
Some homes get multiple offers, and the average number of days a home stays on the market is 70. This number was just 40 days last year. And the total number of homes sold was 341 in April 2023, down from 550 last year.
The beauty, warmth, and lifestyle of South Florida have all been positive attributes, increasing positivity from home buyers. However, expectations of value have become more realistic now.
The rocket-fueled demand for homes of the post-pandemic era is truly over, as there has been a steady decline in the number of homes sold over the last 12-month period.
A notable increase in inventory selection, especially in the luxury home market, has led to an overall reduction in home prices.
Strategies for Selling a House with No Equity
Selling your home the conventional way can be a challenging and stressful experience. It’s a hands-on, time-consuming process and isn’t passive at all.
You’ll need to prepare your home for sale first, making minor repairs and improvements. (Preparing your home for sale is discussed in detail in this post.) Next, you’ll need to work with a real estate agent. These are the easy parts.
The time-consuming phase starts with showing your home to potential buyers and negotiating the price with them.
This can be a period of uncertainty that can easily stretch for several months. Even if you receive a good offer during this period, you can’t be sure whether that offer will progress to close.
Home sellers typically fixate on the high 5–6 percent real estate agent commissions. But you simply can’t overlook other additional expenses such as seller concessions, repair costs, staging costs, and closing costs.
You’ll also need to consider housing overlap costs if you can’t synchronize the timing of your home sale with your purchase and move to the next.
All these costs add up, and the total will exceed 10 percent of the sale price of your home.
For instance, if you’re selling your house for $325,000, the selling costs could be as high as $32,500. Since you don’t have any equity in your house, you must carefully consider your total selling costs, as you might end up paying this high cost out of your pocket.
Pros and Cons of Selling a House with No Equity
Pros
1. You’ll have cash on hand, and you can relocate faster.
Selling a house with no equity is clearly an advantage, as it can help you cover the cost of buying your next house. While not having any equity means the money isn’t yours, you can still get a new loan and buy a home.
Also, you can relocate quickly and not worry about getting stuck in your present home. This is especially helpful when you have to deal with a sudden change in your life circumstances—the death of a family member, divorce, or better job prospects in a different state—that necessitates an immediate move.
If you cannot sell your house as quickly as you would like, or you don’t have the money to pay the closing costs, you can reach out to real estate investors like Home Seller Heaven. The key advantage is they will bear all costs. Hence, dealing with a real estate investor makes great sense, especially if you’re strapped for cash.
2. You might get a good deal.
While it’s impossible to time the market, it’s easier and more profitable to sell your home in a seller’s market. This is because your home will get more offers at your asking price, and there’s a higher likelihood of getting an offer that’s over your asking price.
Cons
1. A strong feeling of emotional loss.
Selling your home can be painful if you love your home and neighborhood and have your roots there. It’s easy to become sentimentally attached to a house, especially if you have built fond memories over many years. Regardless of the fact that you don’t have any equity in your home, you can still feel a strong emotional attachment to it.
But remember, every neighborhood has unique attributes and offers you opportunities to recreate a happy life. Hence, a fresh beginning in a new home and neighborhood can be a positive experience.
2. You might NOT get a good deal.
As I already mentioned, it’s impossible to time the market. But if you get caught in a buyer’s market, you could easily lose a lot of money. Your home may not get any offer at your asking price, and there’s a higher likelihood of getting an offer that’s way lower than your asking price.
Working with a Real Estate Agent
Search for a real estate agent who has sold a house that’s similar to yours in your neighborhood recently. A conventional Google search will suffice. Key in the following words on your browser: real estate agents in Fort Lauderdale.
While most agents charge a commission of 5 to 6 percent, this charge isn’t fixed. It’s negotiable. Find agents who include pricing information on their business website. Bargain with them and reduce their commission to 4 percent.
A real estate agent who sells many houses every year might consider lowering their fees. Remember, in Florida, the seller pays the real estate agent commission. The home buyer isn’t responsible for this charge.
According to the National Association of Realtors, an overwhelming 86 percent of home buyers worked with a real estate agent, and only 10 percent purchased their home directly through the previous homeowner.
The main advantage of working with a real estate agent is they give you the confidence that a professional is on your side. The main services a real estate agent offers include:
- Evaluating your needs after meeting with you in person and answering all your questions.
- Updating you on the current market situation.
- Scheduling home showings.
- Negotiating with home buyers and getting the best price for your home.
- Representing you right through the selling process and acting in your best interest.
- Assisting you in handling all the paperwork.
A competent agent will handle these routine tasks smoothly. Their experience will ensure that you don’t make rookie mistakes.
For Sale by Owner (FSBO): Selling Your Home Without a Real Estate Agent
If you are not keen on working with a real estate agent, then selling your home on your own is a practical option. The major advantage of FSBO is that since you don’t have any equity in your home, your savings on real estate commissions can be sizeable.
Without the help of a real estate agent, it’s easy to make rookie mistakes. So before listing your home, make it move-in ready. Don’t neglect minor repairs, as a potential buyer might use them as leverage to negotiate a lower rate for your home.
Some inexpensive fixes include leaky faucets, clogged drains, fused bulbs, and squeaky doors. Expensive repairs, such as replacing broken appliances and filling up cracks in the walls, can increase the value of your home.
Spend some money on professional real estate photography. Focus on the best features of your home when you market it.
The next crucial point is the list price. If you set a price that’s too low, you’ll end up paying selling costs out of your pocket.
But if you set a list price that’s unrealistically high, few buyers will be interested in your house. As a result, you’ll get fewer look-ins, and your house will stay on the market for several months. The most undesirable scenario is that your house will remain unsold.
So the best approach is to opt for a home appraisal as it can determine the fair market value of your home based on the going rate in your neighborhood. And set a list price that’s neither too low nor too high, taking into account the appraisal value of your home.
ForSaleByOwner.com is a quick online solution for listing your home. The company offers both free and paid packages.
The main limitation of this platform is the small pool of buyers. As a result, your home may sell for a lot less than its true worth.
An effective way to access a large pool of buyers is by listing your home on FlatFee.com.
Negotiating with Potential Buyers
Selling a house is a huge financial transaction—possibly one of the biggest transactions you’ll undertake in your lifetime. So you’ll need to plan your negotiating strategy based on the market conditions.
Stick to Your List Price If You Have Multiple Offers
Sticking to your list price when you negotiate with a potential buyer is a hardball tactic that’s more likely to work when you have multiple offers.
A buyer who likes your house will want to remain engaged. They might return with a higher offer than their initial one because they’ll assume you’ve priced your home fairly.
When you counter with the buyer at your list price, you are essentially telling them what your home is worth, and you are not willing to sell it below its true worth. But one caveat: hardball tactics will only work if your home is in excellent condition.
Avoid Entering a Contingent Sale If Possible
In a contingent sale, the buyer will offer to buy your home subject to selling their present home. This offer is weak because the sale of your home is dependent on the sale of another property involving a different set of sellers and buyers. Agree for a contingent sale only when you don’t have any other offer.
Always Make a Counteroffer
Rejecting an offer flat out isn’t the right negotiating strategy. When you say no, you aren’t giving the buyer an opening to return.
Instead, make a counteroffer in any of the following areas:
- Occupancy
- Price
- Terms
- Contingencies
But remember, when you make a counteroffer in any one of these areas, you’re essentially rejecting the buyer’s offer. So the buyer may decide to simply walk away or make changes in some other area.
In Summary
A point to note when you are selling a house with no equity in Fort Lauderdale is it involves many different costs. And another factor to consider is the current market, which is decidedly sluggish compared to March 2022, with the average home selling for about 4 percent below the list price. The good news is you can speak to your lender and preempt foreclosure even when the equity in your home is minimal.