What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community. Get Started Now!


How to Sell Equity in Your House to Investors

Original post by Constitution Guru of Demand Media

You can sell your home equity to raise money for other purposes.

Your home is a valuable asset that you can leverage by allowing investors to assume some or all of the equity you have in your home. Your equity is the difference between the fair market value of the home and any outstanding mortgages on the home. Selling home equity to an investor requires that you make the investor a partial owner of your home.

Step 1

Draft a contract outlining the terms of the agreement between you and each investor. The contract should specify the payment you will receive from the investor, the percentage of equity interest the investor will receive in exchange, and any other terms or conditions that are a part of the deal.

Step 2

Obtain the investor's signature on the contract.

Step 3

Collect your money from the investor. If the investor doesn't want to transfer the funds to you before you sign over a deed to your home, you should demand that the money be placed in an escrow account pending receipt of the signed property deed.

Step 4

Prepare a deed conveying a designated portion of your interest in your home to the investor. You will be the grantor and the investor will be the grantee. The deed should clearly spell out the percentage interest being conveyed to the investor. For example, the deed may include language conveying "an undivided 25 percent interest in the home."

Step 5

Sign the deed, and if required by state law, have it notarized and recorded in your county land records office.

                   

Tips & Warnings

  • Many state laws provide that a real estate contract terminates upon execution of a deed pursuant to that contract. However, you can include language in the contract providing that the contract will survive the execution of the deed. This may be prudent, especially if you want to limit the investor's right to occupy or force the sale of your home.

Things Needed

  • Deed

References

  • "Real Estate Finance Law"; Grant S. Nelson and Dale A. Whitman; 2008

About the Author

The Constitution Guru has worked as a writer and editor for "BYU Law Review" and "BYU Journal of Public Law." He is an experienced attorney with a law degree and a B.A. degree in history with an emphasis on U.S. Constitutional history, both earned at Brigham Young University.

Photo Credits

  • Hemera Technologies/Photos.com/Getty Images

Advertisement