Home equity ?

Home equity ?

July 4, 2010 By 3 Comments

Question by Sue T: Home equity ?
I bought and sold a home for my daughter using a home equity loan from my home. After selling the home, I put the equity back into my home (and still pay on it). My taxes are reading that by selling this home, I received income – but it’s not. Actually, I lost money… anyone have suggestions?

Best answer:

Answer by cbmttek
Any difference between what you paid for the home, and what you sold it for is considered income, regardless of where the initial payment came from.

The only way that the IRS will see that you lost money is if you sold the home for less then you paid. (i.e. you bought the house for 0K and sold it for K, loss of 00.) If you sold the house for more then you paid for it, sorry, it is income.

Add your own answer in the comments!

home equity?

May 24, 2010 By 8 Comments

Question by J D: home equity?
im looking to buy a home. and my brother told me that the home im looking to buy has equity and at closing i can cash out the homes equity. Im confused because i thought i built the equity in the home buy pay my mortage every month. please tell me if he is right or not . it would be nice if he is. i could use the money for my business . thank you for your time

Best answer:

Answer by Chris
If the house appraises for more than purchase price, yes, technically you should be able to borrow 90% of the equity – a lot of lenders have cracked down on this due to so many folks getting 100% loans and then cashing out the equity and walking away, so I would check with your lender-

Know better? Leave your own answer in the comments!

Comments

mister ed says:

July 4, 2010 at 10:48 pm

no the only taxable income would be the difference of what you paid for the house and what you sold it for — in you case you may in fact have a deduction!!

STEVEN F says:

July 4, 2010 at 10:58 pm

Your taxes are NOT reading ANYTHING. You received a statement showing the PROCEEDS from selling the house. This is NEVER ‘income’. Your ‘capital gain or loss’ is the difference between what you received for selling the home and what you originally paid. Take ALL your paperwork to a CPA to properly complete the tax forms properly. If you don’t have paperwork from when you BOUGHT the home, the county recorder, or whoever handles deeds in your area, should have the records you need.

Bentl says:

July 4, 2010 at 10:59 pm

the difference is the taxable income

The selection of home equity loan should be done based on your specific condition. To help you make the decision, answer certain questions like the amount of money you will require, the duration of requirement of the loan, the time needed to repay the loan and the maximum monthly payment you can make.
http://www.debt-loan-refinance-mortgage-credit.com/category/Home-Equity-Loans.html

Paula M says:

May 24, 2010 at 12:45 pm

A home is only worth what the appraisal says it is…..It may be worth say $200K, but with the bad market it can only sell for…..$160K……that does NOT mean you have $40K in equity….

Equity is the result from owing less than the house appraises at. Remember, it can appraise high….but if there are no buyers…no equity. Your brother is dreaming.

Amanda H says:

May 24, 2010 at 1:38 pm

haha, no.

Equity is the amount of value there is beyond what you owe. If you get a killer deal it might be worth more than you pay, but you cant caash that out at closing- you’d have to get an equity loan (aka pay that back). Aside from that, banks prefer you to have at least 20% equity– so a 5% buffer isn’t enough to draw from without paying high rates.

bianca says:

May 24, 2010 at 2:17 pm

What your brother mean is ,that the house you are thinking to buy cost less, then appraised value. This is a equity you are buying, but in today’s mortgage situation it is very hard ,rather impossible to get cash back on the closing, because lenders not allowing this kind of transactions. The only way to get the money on the closing is to agree to buy this house for higher price and get the difference from the seller after the closing, because he will get the check.

HeyDonny says:

May 24, 2010 at 2:52 pm

Your correct, your brother is wrong.
Hard to explain based on your question,but, if you put say 10% down towards the homes purchase, your applying 10% to the Principal or Equity. You then have 10% equity in the home.
I don’t know where your brother figures that you cash out the equity at closing / purchasing the home.

livinginma says:

May 24, 2010 at 3:46 pm

having equity means that it is worth more than you paid for it and you can sell it immediately and make money (equity). unless you are talking about an auction or other unusual situation, the market sets the price of a home. so when you buy it at a market price, there is no equity in it or it would have sold for less. be careful. prices are still falling.

lendingwhiz2008 says:

May 24, 2010 at 3:46 pm

Unfortunately, NO. Not at least in the sense that I think you mean.

There are ways to get cash back at closing but it’s more complicated and it involves multiple buyers and some creative investor techniques (that are legal if done properly)

But, in the context of buying a house that someone thinks is worth $X and you’re going to pick it up at $Y and you would get the spread(the difference) of $D, then NO. If the home truly had built in equity then you would have to refinance the home and find a lender that had no seasoning requirements for a cash out transaction.

Please note, a house is only worth what a market will bear. The house is not worth what you think it is worth or even what an appraiser thinks it is worth. These are BOTH opinions.

Yes, the appraiser’s opinion matters 10 fold over what you think because that opionion is what a lender is willing to accept in terms of financing.

However, If you have an appraisal for $X and put it on the market it may not sell for that. It could sell for more or less depending on market conditions.

What ever someone is willing to pay for your home, that’s the true market value at that moment in time.

SIDE NOTE: A good way to find out what it is truly worth is to run a non-obligatory auction. The price will get bid up to watch the market will bear. Then if you comfortable with it, then accept the offer, if not pull it off the market.

There would have to be extenuating circumstances for a property to be sold with equity still left in it (as quantified by a recent appraisal).

For instance, if you bought a home directly from the previous owner in foreclosure and they had half the mortgage paid off, but they lost their jobs, ruined their credit, and thus can’t refi, so they have no choice to sell. If you were lucky enought to get to them and say offer to split the remaining equity (buy their house for what is owed and only pay them for half of the remaining equity, then you could have, a 25% equity position.) Yes people do this. Again, another conversation.

Anyways, depending on if this purchase would be for an investment or for you personal residence then there are other things to consider, I would find your local real estate investors club and ask them.

Good Luck

CINDY W says:

May 24, 2010 at 4:07 pm

It’s great that you will have instant equity but you CANNOT get cash back at closing. This is because the lender will use the LOWER of the sales price or appraised value to determine your loan to value.

Sorry to disappoint you, but again, you cannot get cash back at closing.

CW

cheeba0228 says:

May 24, 2010 at 4:16 pm

A home is only worth what someone will pay for it. Unless you are buying from a family member and getting a gift of equity then the sale price or appraised value whichever is less will be the value used to calculate it. But either way you will not get money back at closing.

Related posts

Comments

Speak Your Mind Cancel reply

home equity?

Related posts

Comments

Speak Your Mind Cancel reply

Sponsored Links