I bought a 5 bdrm 3.5 bath foreclosure for 59k last year. Spent 27k in renovations. Newly appraised value is 154k, does that mean I have 68k in equity

Asked by Gapeach770, Atlanta, GA Thu Apr 21, 2011

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davidwbrower, , Woodstock, GA
Thu Apr 21, 2011
Basically, Yes, if you can find someone to pay you $154K for it. There is no such thing as equity, unless you sell. It's kind of like stocks. If you paid $1 for a stock that is now worth $20 your profit is $19 per share only if you sell. If you aren't selling or can't find a buyer you have nothing. Sounds like you did pretty good though.
2 votes
Levi Afrah, Agent, Atlanta, GA
Thu Apr 21, 2011
Home equity is the market value of a homeowner's unencumbered interest in their real property—that is, the difference between the home's fair market value and the outstanding balance of all liens on the property.

Tto figure out your equity: 154k less any loan balance on the home=your equity

If you paid cash for the home and dont owe anything on it, your equity is 154k.

By the way, Congrats! It sounds like you got a great deal!! (as long as your appraiser did a good job)
1 vote
Aaron Mtuanwi, Agent, Conyers, GA
Mon Apr 25, 2011
It sounds like you have great equity, but true equity is how much you net at sales.
0 votes
Lee Taylor, Agent, Decatur, GA
Fri Apr 22, 2011
Thumbs up to David Brower - the answer to your specific question is a specific no, but kinda sorta - depends on how you play it.

After reading your updated answer, then it sounds like you could do a few smart things with $20,000 or so in a low interest line of credit...just trade a small amount of equity and keep your debt low...doesn't matter what your current, yet dated appraisal says - it only matters if a lender is willing to consider that appraisal report for their collateral valuation on a home equity line. If not, then welcome to a new report, and a new valuation...
Web Reference:  http://intowninsider.com/
0 votes
Jean Andersen, , Atlanta, GA
Fri Apr 22, 2011
Yes, it does and what you can do with the newly found equity is conside a reverse mortgage. A Reverse Mortgage is a loan product available to Americans over 62. Seniors can use this loan program to eliminate their monthly mortgage payments for the rest of their lives. They can use a Reverse Mortgage to re-finance their existing home or to purchase a new home. How much better would your life be if you didn’t have a mortgage payment?
Call me at 678-742-3689 for details.
0 votes
, ,
Fri Apr 22, 2011

There are several options to accomplish what you mention in your most recent post. Generally speaking, a cashout refinance will use the appraised value of the property only after the owner has been on title for 12 months. Not sure exactly when you purchased the property last year but this is an important consideration. Before twelve months the purchase price is the governing value. Your renovations of $27k can be added to the cost basis of the house if you have receipts for the repairs made. So if you of the one year mark, your home will be looked as having a value of $86,000. You would be able to finance 80% of that amount with a conventional loan and 97.75% with an FHA. Most equity lines will limit you to 80% of the $86,000 as well.

With regard to additional repairs, there is an FHA Energy Efficiency Mortgage program that allows you to finance improvements in your home's energy efficiency into the new mortgage. But if you would prefer not to have mortgage insurance, this may not be the way to go. There is also the FHA 203k renovation loan which will use $86,000 as the cost basis and allow you to finance up to $35,000 in new renovations.

I know I have given you a number of options, feel free to email me if you would like more specific guidance.

Timothy Brown | Senior Loan Officer
Academy Residential Mortgage, Inc.| tbrown@academyresidential.com
11380 Southbridge Pkwy, Suite 200 | Alpharetta, GA 30022
678.468.5626 x110 | fax 678.935.1156 | cell 678.467.9959
0 votes
Gapeach770, Home Owner, Atlanta, GA
Thu Apr 21, 2011
Thanks for all of your responses. Just to give you a bit more insight-I ordered the appraisal from a licensed appraiser, recommended by my lender. The renovations were mostly cosmetic. Originally, it was my intention to renovate and re-sell. I have now fell in love with the neighborhood and become emotionally attached. Since I now plan to occupy the home for a minimum of 7-10 years, there are additional energy efficient enhancements I would like to make such as replacing the HVAC, dry walling the basement and if feasible, updating all appliances. I'm aware that this will take time to accomplish-just want to educate myself as much as possible concerning, the equity available. Would you suggest getting an HELOC or refinancing(cash-out) option?

Thanks again.
0 votes
Ken Guillen, Agent, Duluth, GA
Thu Apr 21, 2011

Everyone has said the correct fomula on equity. Fair market value by an appraiser is the key. Equity is somewhat of a moving target or on a up and down line based on the market. Just as today people with a $100K equity 4 years ago may owe as much or more than the market value of their home today (sad). If you plan to sell it at the current rate of return, I would not wait long as the repairs and new things added may not look or be as nice.

The other 'possible' concern is what do you expect your neighborhood to be like in 5 to 7 years. We all expect values to rise again in the next 3 to five years however that depends on LOCATION and the STABILITY of your presonal neighborhood and again the market!.

Thirdly, and something that historically use to be of great value is that "A HOUSE IS A HOME". Does this house feel like home and a place you can enjoy for many years. That has importance. Sure we all want to walk away with a "gain" when we leave and yet we know now there is no specific gurantee. It appears likely you will be OK.
0 votes
Darrell Hess, Agent, Marietta, GA
Thu Apr 21, 2011
Hip Hip Hooray! Grats on your investment. If you doing a home equity loan and plan on staying there awhile then nice line of credit you now have! If you are planning on selling what it appraises for and what someone is willing to pay is a different story. The gist is though what it appraises for minus what you owe is your equity.

Is this appraised value from a licensed appraiser or from an online estimate similar to what Zillow does?
0 votes
Isabel Elses…, Agent, Alpharetta, GA
Thu Apr 21, 2011
That is great news! And a good investment for you.

This is a great time to buy!!
0 votes
Adrian Morris, Agent, Atlanta, GA
Thu Apr 21, 2011
That is correct. Your equity is the spread between what you owe and how much the home is actually worth.
0 votes
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