Built In Equity Question

[WVBaker]

Have a question for those with infinitely more wisdom than I have concerning financing.

Should you find an investment property which you believe is priced well below the market rates for a particular area, can you make use of the “built in equity” that the property has at the time of purchase?

Example being, according to the tax records the property sold for $265,000 in the beginning of 2006. Due to alleged personal reasons, the property was then listed for sale at $245,000. No buyers came forth, the listing expired and the owner decided to list the property with a different agency. That same property is currently listed in the low $200,000s. “Zillow”, for what it’s worth, places the value around 270,000. Therefore, there must be some equity built into this property in some form.

If I can purchase the property for $200,000 and the appraisal comes in for oh say, $240,000 or so, is there any way I make use of that equity for the initial purchase?

Also, are there any other sites out there other than “Zillow” for determining a properties estimated value?

If anyone can help or lead me in the right direction, it would be greatly appreciated. :praise:

Thanks

[Jim Johnson]

Have a question for those with infinitely more wisdom than I have concerning financing.

Should you find an investment property which you believe is priced well below the market rates for a particular area, can you make use of the “built in equity” that the property has at the time of purchase?

Example being, according to the tax records the property sold for $265,000 in the beginning of 2006. Due to alleged personal reasons, the property was then listed for sale at $245,000. No buyers came forth, the listing expired and the owner decided to list the property with a different agency. That same property is currently listed in the low $200,000s. “Zillow”, for what it’s worth, places the value around 270,000. Therefore, there must be some equity built into this property in some form.

If I can purchase the property for $200,000 and the appraisal comes in for oh say, $240,000 or so, is there any way I make use of that equity for the initial purchase?

Also, are there any other sites out there other than “Zillow” for determining a properties estimated value?

If anyone can help or lead me in the right direction, it would be greatly appreciated. :praise:

Thanks
If the property really has equity there are several ways of using it. You can do a cash out refi for one. There are also some cool advanced ways of buying. You might close on day one at 100% of the purchase price, then close on day two with 80% LTV. Both can be the same price on the same house, just different closings.

Now for Zillow... for what it is worth it is off on the value on my house by about $300,000. Do not use the values on Zillow for anything... find a good agent that can share with you what the property will sell for in 30 to 60 days. You will have to sell it for a discount if you want a quick close... but this is the best way to buy and flip.

[southernhomeinvestments]

keep in mind your end usage of the property. a cash out refi is a GREAT way to get tax deferred money. just make sure that you will still cash flow with rents on the new mortgage, or have optional end users to quick turn the house to.

[Tim Wieneke]

If I understand what you are asking - can you use the built in equity for financing your initial purchase of the property? Yes and no. You can't call a loan of 200k an 80% ltv mortgage on a property if you bought it for 200k even if the value is 240k. It's still a 100% ltv mortgage though an individual bank may be more open to lending to you knowing that some equity is there.

Might help you get a yes, but probably not as sexy of a yes as you would like.

[Mtatz]

http://realestatecenter.bankofamerica.com/RePortal/homepage.aspx

You asked for another site for property values. Just throwing this out there. There is a link under both the buyer and seller tools to estimate a property value.

[TommyOH]

Awwww, Michael, there's da baby! Congratulations Dad! First time I saw the pic.

[andrew]

You should avoid using the estimates provided by Zillow. They are most often far from actual price of the house.

Take help of any appraiser in getting the actual value of the house.

When you make the purchase, mortgage company will base the value of the house at its actual price, say $240,000 and if you are getting it for $200,000 then $40,000 would be the seller discount.

[brianb_cobbres]

If I understand what you are asking - can you use the built in equity for financing your initial purchase of the property? Yes and no. You can't call a loan of 200k an 80% ltv mortgage on a property if you bought it for 200k even if the value is 240k. It's still a 100% ltv mortgage though an individual bank may be more open to lending to you knowing that some equity is there.

Might help you get a yes, but probably not as sexy of a yes as you would like.

No, thats not quite what Jim said. Your purchase price would be $200k so your initial mortgage would be for that full amount. You could then turn around and refinance to pull some of the equity out of the property with most loans running at 80% of the appraised value so if the appriased value really is $270 you would be able to cash out $16k and still avoid private mortgage insurance but now you mortgage would be $216k.

[Tim Wieneke]

No, thats not quite what Jim said. Your purchase price would be $200k so your initial mortgage would be for that full amount. You could then turn around and refinance to pull some of the equity out of the property with most loans running at 80% of the appraised value so if the appriased value really is $270 you would be able to cash out $16k and still avoid private mortgage insurance but now you mortgage would be $216k.

I was responding to WV. As I understood it, WV was asking about using the equity in the property "at the time of purchase" rather than a later refi.