Home Buying in Placentia>Question Details

Greg Chan, Home Buyer in Montebello, CA

what is an equity sale?

Asked by Greg Chan, Montebello, CA Sat Jul 14, 2012

Help the community by answering this question:



An equity sale is a sale in which the property value is more than the seller owes in mortgages and other liens. Others may also say it is when the seller does not have to bring any funds to close a home sale.

0 votes Thank Flag Link Sun Jul 15, 2012
Hi Greg!

The four answers below have defined a Standard Equity Sale very well! The most important part of the definition is that there are no banks involved in the Seller's role! There are many positive implications and benefits for the Buyer when purchasing a home that is owned by a Seller who has enough equity to pay off all loans, as well as his closing costs, and still walk away with proceeds from the sale.

1) The whole process of making an offer tends to go much more quickly ... and you can even get replies on weekends! It is a more personal experience, as the Buyer and Seller ... who both have their own motivations ... tend to try and accomodate each other. Banks rarely extend any sort of accommodation to the Buyer.

2) While the Buyer retains the right to a physical inspection in a Short Sale or Bank Repo purchase, most banks will make NO repairs at all and this is usually declared up front.. With an Equity seller, the Buyer at least has a flying chance that the Seller will do at least SOME indicated repairs ... especially code violations or safety issues.

3) An Equity Seller will almost always provide a termite clearance and pay for a Home Protection insurance policy for one year. In the case of a condo, the Equity Seller will usually participate in Association transfer fees. Often (usually) not true when purchasing a Repo or a Short Sale.

With a Repo, the taxes and association dues are brought current and prorated as of Close of Escrow. With a Short Sale ... the Buyer may have to contribute $$ to bring them current. With An Equity sale, the Buyer can assume they will be current and prorated.

4) An Equity property is usually in better condition and has been better maintained than the other types ... because there is no apparent history of extreme financial difficulty. People with no money do not maintain their homes.

5) An Equity Seller will give a more comprehensive and detailed disclosure of property condition and history.. A Short Sale Seller has no motivation to do so ... he has nothing coming out of the sale. A bank is exempt from disclosing at all because they know nothing about the property except the paperwork.

Buying from an Equity Seller has MANY benefits for the Buyer.

I keep a statistical record of a few North OC cities including Placentia. Placentia's stats are about to be updated. If you will send me your Email address, I will be happy to send you the new stats in about a week.

For Placentia Sales closing between 3/15/12 and 4/14/12 .... 49% were Equity Sales.

Closed Sales price averaged 99% of List price. Ratios ranged between 90% and 106% on Standard Equity Sales. The market is very hot right now. All over North OC. Prices are just beginning to go up. But, they are going up.

Please contact me if I can be of additional help to you!

Marlene Prescott
Prudential CA Realty
714 283-6643
0 votes Thank Flag Link Sun Jul 15, 2012
Hi, Greg -

"Back in the day," buyers didn't hear terms such as equity sale when househunting. But with the changes to the economy and number of distressed properties for sale, listings are now often categorized by the type of sale they are.

An equity sale is a traditional sale where the sellers have equity (value) in their home. Perhaps they are long-time owners, perhaps they purchased when prices were low, perhaps they put down a significant amount of money when purchasing. If they have a mortgage on the property, they owe less on the mortgage than the current market value of the property, and so will receive money from the sale of their home.

An REO (Real Estate Owned) sale is where the property has been foreclosed upon and is currently owned by the bank who held the mortgage. In this case, the seller is the bank, which is an institution not a "human" and so the process is much more bottom-line and often done completely on-line. The buyer will be given clear title to the property at the close of escrow. However, these types of sales are usually "as is" with few or no repairs made by the seller. Depending on the condition of the property, it may not qualify for financing and will have to be a cash sale. The prior owner is not involved in this sale; all proceeds go directly to the bank.

A short sale is in the middle -- the homeowner still owns the property, but owes more on their mortgage than the current market value of the home. If the owner can demonstrate a true financial hardship, the bank may agree to accept a short sale of the propertty. The homeowner must accept the buyer's purchase offer, which then goes to the bank, who must approve the terms of the sale as well. At the close of escrow, the owner receives no money from the sale; all proceeds go directly to the bank. With a short sale, it is very important to determine if there are issues such as back taxes or HOA fees that need to be paid or have become liens against the property.

There are also equity sales where the seller is not your typical homeowner but instead an investor. These are usually called "flip" properties, where an investor most likely purchased a foreclosure property for cash and has renovated the property and is now re-selling the property for profit.

I hope that helps explain the terms you hear when househunting in today's real estate market!


Virginia Clark
Atlantic & Pacific Real Estate
0 votes Thank Flag Link Sun Jul 15, 2012
Quite simply, an equity sale is one where the seller possesses equity...that is, the house is worth more than their mortgage on the home...so they walk away with money in their pocket.

In my opinion, these are the easiest transactions to work with..where there is a live person on either side and not a bank.
0 votes Thank Flag Link Sun Jul 15, 2012
Equity is the difference between what someone bought their home for and the actual value of the property when they sell it. In other words if they bought for $100,000 and then years later they sell it for $175,000 the difference of $75,000 is the equity or the owners profit from the sale. A short sale is where the owner owes the bank more than the property is worth hence the word (short) sale.

I hope that this helps clear up a few things for you,

Lori Hanson
OC Homes Realty
DRE 01405146
0 votes Thank Flag Link Sat Jul 14, 2012
Thank you for the response. How is an equity sale listing different from a standard sale listing from a buyer's perspective?
Flag Sat Jul 14, 2012
It is a regular sale, it means the sale is not a short-sales or bank owned.

A short-sale is when the sale of the house will not pay off the current loan against the house.

Bank owned is when the owner if the house is now the bank.

So equity sale is a traditional sale.

If you have any other question, please call me at 714-955-1932
0 votes Thank Flag Link Sat Jul 14, 2012
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