Equity Is Fake - Explained In Detail
Have you ever thought of what 'equity' really is? Many people believe it is like cash in the bank but the reality is, it is much closer to being volatile like a long term stock that is subject to a market crash. Equity is created by a market where buyers are willing to pay a price for properties that are comparable to yours. If that buyer pool dries up or funds are no longer flowing in the market place, the demand for that property will go down. In order to meet the new lack of demand, people will lower their prices on the properties and therefor strip the equity out of the property. The equity in the property is not as secure as a bank account as it is dictated by the demand of other people. Yes, technically cash itself is viewed in the same manner in that it is only as valuable as the confidence people give it but equity is much more fragile. People can use their 'equity' i a line of credit but in the event that the market tanks and they have a line of credit out, they can easily now owe more on their property than it is worth. Having a lot of equity in properties is certainly comforting but using that equity assuming that it is as stable and secure as a bank account can be a risky venture.
Ian Walsh
215.839.3271
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