Equity When You Sell: Find Your Real Number (NC)

Sell your home for $450,000 and you won’t walk away with $450,000. You won’t even walk away with the sale price minus your mortgage. If you’re planning to move up, your equity when you sell is the number that becomes your next down payment, so it’s worth getting it right before you shop.

Moving boxes; estimating your equity when you sell and move up

Start with the easy math on your equity when you sell

Here’s a hypothetical example. Say you sell for $450,000 and your statement says you owe $280,000. On paper that’s $170,000 in equity. But a few things come out before you see a dime.

What comes out of your equity when you sell

Your actual loan payoff. Your payoff includes interest up to the closing day, so it’s usually a little more than the balance on your last statement. Your closing attorney will order an exact payoff from your lender.
The costs to sell. These include brokerage compensation (which is negotiable), your closing attorney’s fee, and North Carolina’s excise tax on the deed. The excise tax is $1 for every $500 of the price, under N.C.G.S. 105-228.30. On a $450,000 sale, that’s $900. My guide to the cost of selling a home in Cary breaks these down.
What you agree to after the inspection. Buyers often ask for repairs or for help with their closing costs. Whatever you agree to comes out of your proceeds.
Anything else tied to the house. A second mortgage or home equity line, and any prorated property taxes or HOA dues, get settled at closing too.

What’s left is your net proceeds: your real equity when you sell, and your real down payment for the next house.

Plan with that number, not an online estimate

Online estimates are a starting point, but they can be off in either direction. They’ve never seen your kitchen. They’ve never smelled your dog. A price based on actual recent sales near you, adjusted for your home’s condition, is what buyers and appraisers will use, so it’s what you should use too.

Two other things affect how much equity you can use:

Timing. If you need the equity for your next down payment, you’ll usually have to sell first or line up the two closings. My lesson on how to sell and buy at the same time in NC covers the options.
Keeping the old house. Some move-up buyers rent out their first home instead. That keeps the equity in the house, not in your pocket. See should you sell your house or rent it out.

Taxes are a separate question

Many homeowners who owned and lived in their home for two of the last five years can exclude a large part of their gain from federal income tax, but the rules have limits. The IRS explains the home sale exclusion here. Talk to a CPA about your situation.

Get your real number for your equity when you sell

Before you fall in love with your next house, find out what this one is worth. I’ll pull actual recent sales near you and give you a free broker’s opinion of value from First Flight Realty, not a Zestimate.

General information, not legal, tax or lending advice. A broker’s opinion of value is not an appraisal.

Keep learning with the Professor

Mike Hall, The Triangle Real Estate Professor, is a broker with First Flight Realty in Cary, NC, and an NCREC-approved real estate instructor.

Moving Up? How Much Equity You’ll Really Have When You Sell