How to determine if there is equity in the house

Question

How does one determine if there is equity in a house?  I would like to help some homeowners in pre-foreclosure status by catching them up on their payments, rehabbing the home for a flip and then sharing in the profits with them.  This process only works if there is some decent equity in their home.  Is there a way for me to discover this before ever picking up the phone to contact these people?

Carlos Aguilar · Answer

Howie,

One way is to hire an appraiser to determine market value of the home. However, a full blown appraisal can be expensive on every single property, $200-500 (depending on the size of the home). The best alternative to that is doing a Broker Price Option (BPO). Which is an depth market comparison typically done by a licensed Realtor. The cost can range from $40-60. Some times if you develop a relationship with an agent they can do it for no cost. If your just doing  one or two. If you need several than if important to compensate them for the work. Working with an experienced agent that knows BPO guidelines will yield the best results.  You can google what those established guidelines are.

Many Banks prefer ordering a BPO than an appraisal to get an idea of market value. They usually order them when they are dealing with a short sale or foreclosure sale. Its cheaper and faster. When a bank is lending out the money then they will prefer to do an appraisal.

Once you have that estimated value, compare that to the actual up to the minute payoff from the bank. The homeowner will have to call their lender and request for a payoff.

If the payoff is greater than the home value , you know you're going to be upside down. If the home value is greater than the pay off , you might have some equity. Just subtract one into another  you then have your estimated equity. When you work with very close estimated values, at the end you work with confidence in knowing where you stand.

Good luck!

Jon Holdman · Answer

Not reliably.  To know if there's equity you need to know the value and the debt.  You should be able to come up with a rough value.  But without knowing the details of the condition, that's hard to get accurate.

You may be able to find some debt information public records.  But actual balances owed are not public.   The only ways to find that out reliably is from the lender.  Lenders won't talk to you unless you have the borrower's permission.

A way to sort of get to it is to look for houses that have been owned for some length of time and do not have any recent loans.  If someone bought a house 10 years ago and has never refi'ed or HELOC'ed it, and have made all their payments then the loan balance is lower than it was.