What is Equity Theft in Atlanta?

**Note that in the video I use the terms equity theft, equity stealing, and equity skimming to all mean the same thing. Equity “Skimming” is technically not the same thing. So, just note that when I talk about equity skimming in the video, I really mean equity theft. Click here for more info about equity “skimming.”

I’ve read a few news articles lately, and I’ve seen some discussion on TV about this around Atlanta, so I think it’s important for everyone to know about this and what you can do to protect yourself.

Check out the video post below and let me know what you think!

Equity Theft in Atlanta Defined --- (Plus, How to Protect Yourself as a Homeowner!) ---
Video Transcription

Equity Theft Defined

What does this mean? At its most basic level, all this really means is that a home is being purchased for substantially less than what it’s worth. It’s just as easy as that.

So what is “substantial”? These articles talk about homes that are being bought for less than half of their value, so that would be substantial.

How Much is Your Home Worth?

In order to protect yourself, you have to know how much your home is worth. If you sell your house, and you want to be paid for the full value, then you have to know how much it’s worth, right? But, how do you determine that? It’s not that easy.

For starters, you have to compare your home to other homes in the area that are similar in terms of square footage, bedrooms, and bathrooms, the year built, and the number of repairs needed. This is where things start to get confusing and can become an educated guess unless you pay for a full appraisal.

Let’s Look an Example:

Perhaps the best way to show this is through an example.

Let’s say that you have a house that you own outright, you don’t have a mortgage on it, and it’s worth around $150,000. You know that it’s worth $150,000 because other homes in your area have sold for $150,000 recently, they’re all built around the same time, they’re the same size, they have the same number of bedrooms, etc.

Now, say somebody comes in and buys your home from you for $80,000. You have a home worth $150,000  and you sold it for $80,000. The good news here is that you now have $80,000 of cash in your pocket and you can do whatever you would like to do with it! You can put it down towards another house, you can pay off some debt, whatever you want with your $80,000.

The bad news is that you could have potentially received $150,000 for it, and you essentially just lost $70,000. The person who bought that house from you took an additional $70,000 in equity.

This is exactly what we mean by equity theft – someone bought a house worth $150,000 for $80,000. It’s very real, it’s very dangerous, and it happens a lot.

What can happen now is, potentially, the person who bought it can turn around and sell it for the fair market value of $150,000. So they just made $70,000.

How to Protect Yourself

How do you protect yourself? How do you recognize that a potential scam is happening and what can you do to avoid it?

  • Get lots of offers – Talk to a lot of investors. In Metro Atlanta, there is no shortage of real estate investors who will make you an offer. All you have to do is go online and Google, “We buy houses, Atlanta,” or, “Real estate investors near me,” or, “Sell my house as-is.” “Sell my house fast,” etc. You’ll get at least 10 websites for investors who are looking to buy houses like yours. Talk to them, see what kind of offers you’re getting. If you’re getting the same numbers from all of them, then that’s probably about how much your house is worth. Somebody might offer you more, so go for the highest bidder.

 

  • Use Zillow – If you want to get a decent understanding of how much your house is worth, you can use the method that we use to estimate your home value using Zillow. It’s free, it’s easy, it takes just a couple of minutes. Note that this method doesn’t really take into account if you have a lot of repairs, so you will have to adjust if that is the case for you. But if your home is in pretty good shape, it’s easy to get a sense of how much your house is worth using Zillow.

 

  • Trust Your Gut –  If the offer feels too low then it probably is. Don’t feel like you have to rush into anything or make a decision right away, even if you’re being pressured to. Take a few days, sit back, think about it, talk to your friends and family, talk to other investors, like I mentioned before, and see if the offer feels right. You can always counter with a higher asking price. You can try to negotiate it up.

 

  • Ask if Your Buyer is Actually Buying the House –  Are they buying it? Or going to sell it to another investor? Sometimes people will try to come in and try to get the house for a substantially reduced value and they have no intention of buying the house. They get it under contract and then just turn around and sell the contract to another real estate investor. This is called real estate wholesaling. Look it up so that you understand what it is. It’s not necessarily a bad thing in and of itself, and it’s not always a scam. A lot of times it can be a win-win-win for all the parties involved, but there is room here for people to be taken advantage of so you just have to be careful.

We Are Here to Help!

As always, reach out, and we’ll be happy to take a look! We can show you how to evaluate potential offers that you’ve received, and help you decide if it’s real, if it’s a scam, or if somebody is trying to take advantage of you. Give us a call at (404) 500-8094 today, or submit your info through the form below!

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