Equity 101

Equity = home value minus loan balance.

Example: home worth $300,000, loan balance $250,000 → equity $50,000.

Low Equity

You have equity, but not much. Example: home worth $300,000, loan $280,000 → $20,000 equity.

After realtor commission (6% = $18,000) and closing costs ($2,000), you net $0. Sometimes you owe money at the close.

Negative Equity (Underwater)

Loan exceeds home value. Example: home worth $300,000, loan $350,000 → -$50,000 equity.

You can't sell at market price without paying out of pocket.

Why Subject-to Works Here

With subject-to, you're not trying to make money. You're trying to stop the bleeding.

  • No realtor commission.
  • No repairs.
  • No paying down the mortgage yourself.
  • Deed goes to us; we manage the loan.

Your only "cost" is the risk that we default. Hence the need for a good attorney and a clear agreement.

A Worked Example

Take a house that will realistically sell for two hundred thousand more or less. The first mortgage is at one hundred and eighty. Commission at six per cent is around twelve. Seller-side closing costs run a few thousand more. The buyer asks for a credit on the roof. That is already at or past the payoff before anyone has moved out — and this is a house the owner thought had twenty thousand in equity.

Add a Second Lien and It Inverts

Put a fifteen-thousand equity line behind that first mortgage and the same sale now requires the seller to bring money to closing. This is the most common version of the call we get.

Why the Appraisal Is Not On Your Side

A retail buyer needs financing, financing needs an appraisal, and an appraiser works from recent comparable sales. In a tract subdivision that comp set is deep and unforgiving, as the Enterprise page explains. Money you spent on the kitchen frequently does not move that number.

What Removing the Commission Changes

Selling directly takes the largest single line item off the closing statement. On a thin-equity sale that one change is often the difference between a deal that closes and a deal that cannot. The subject-to page covers what happens when even that is not enough.

Concessions Are the Line Item People Forget

Buyers in a slower market ask for help with closing costs, a home warranty, or a credit against an inspection finding. Each one comes off your side of the statement. An owner who penciled out the sale using the asking price and the loan balance alone will be short by several thousand at the table, and there is no equity cushion here to absorb it. Owners whose house has already sat through a listing cycle should read what those months cost alongside these figures.

What to Do With These Numbers

Get your actual payoff from your servicer rather than guessing from the balance — the two differ by interest, fees and any escrow shortfall. Then read the comparison of your two real exits, and if the terminology is still fuzzy, the negative-equity explainer covers it. Our process page lists what we need to give you a written answer.