When we use the term "equity", we are referring to more than just the value of a home. To determine the equity a homeowner has, we have to consider the cost of not only the mortgage payoff (if any), but the total cost of selling as well.
In Minnesota, as a general guide, a homeowner's selling costs, or "settlement costs" as title companies refer to them (not including mortgage payoffs), are typically in the range of 6% to 10% of the sale price. I realize this may seem like an enormous amount, but this includes broker commissions (which can be negotiable), property tax pro-rations, recording fees, title company fees, and other state required tax fees.
Also included in that cost range is a large variable for most transactions- whether or not it is agreed that a seller will "credit" or "contribute" an amount toward a buyer's lender costs. Depending on the loan type, down payment, and lender required escrows or prepaid items (extra property tax and homeowner insurance escrows), this amount can really vary for each transaction.
Most lenders allow a seller credit toward a buyer's closing costs of up to 3% of the sale price. In negotiations, a seller is usually willing to work this into the price, as long as their net price (sale price less buyer closing cost credit) is acceptable. This then creates that broad range, and sometimes higher seller settlement costs.
A home seller has to take these factors into account when calculating the bottom-line (net) equity, so one can plan accordingly. A good Real Estate agent will work through these numbers with a seller to properly estimate the true selling costs and net estimate of proceeds.
Contact me today if you'd like me to calculate your current approximate net equity. http://www.mndreams.com/contact/
Written by Glenn Necklen, Broker / Owner / REALTOR at Necklen & Oakland- Professional Real Estate services in Maple Grove, MN.