The Housing Scene

Homeowners who are in danger of losing their jobs -- or who have already been laid off -- have a financial cushion besides what they have in savings. It’s called equity, which is the difference between what the house is worth on today’s market and what you still owe on your mortgage.

Even if you bought your house just a few years ago, you may have already built up significant equity, thanks to quickly rising prices. The trick is figuring out how you can access it before you are out of work.

Indeed, you’ll find it difficult, maybe even impossible, to find a lender willing to make a loan to someone who is out of work. No income, no loan. So if you think you are going to be canned, act now.

One way to access your home's equity is to take out a second mortgage or a home equity loan. In both cases, though, you’ll be required to make monthly payments. And taking on monthly payments at a time when you have little or no income isn’t advisable.

“Don’t take on debt,” warns Allen Price of BSI Financial Services in Irving, Texas. “It could put you in an even worse position, especially if it takes you six, nine or even 12 months to get another job.”

A better way to tap into your equity is with a home equity line of credit. A HELOC is still a loan, but you don’t have to take any money until you actually need it. It just sits there on the books, ready to be withdrawn as your personal situation dictates.

If you’re among the minority of folks who have set aside reserves for a rainy day, you might never access the loan. But if you don’t have enough savings -- or you are out of work for so long that you deplete your stockpile -- your equity is there when you need it.

Again, though, a HELOC is still a lien on your house. Once you take some money from your account, you’ll have to start paying it back each month. So you should also consider a shared equity mortgage -- also called a shared equity agreement or deal. In these transactions, an investor gives you cash in exchange for part of the profits when you eventually sell your house.

There are no income or credit requirements, and while it’s called a mortgage, there is no loan involved -- no debt to be repaid while you are searching for work. Investors often cater to customers who don’t meet the requirements for traditional loans, but any homeowner can qualify.

Most people turn to shared equity mortgages when they want to buy a house but don’t have enough money for a down payment: An investor contributes to the down payment in exchange for a share of the equity down the road. But these deals also allow you to tap into your home equity anytime you need some financial help.

With a shared equity mortgage, you won’t be required to make any payments -- not even interest -- until you sell or refinance your mortgage. At that point, you'll repay the investor's initial input, plus an agreed-upon percentage of the property's appreciation.

How much money the investor is willing to put up depends on any number of parameters. So does the percentage of the profits they’ll want in exchange.

Here’s a simplified example: Let's say an investor gives you $50,000 today in exchange for 25% of your home's future appreciation. Years later, when you go to sell your place, it has appreciated by $100,000. So you’ll owe your investor $75,000: their original investment, plus 25% of that $100,000 appreciation.

Shared equity lending isn’t some backroom operation. According to Price, whose company services shared equity deals on behalf of investors, the four largest investment firms wrote $2 billion worth of shared equity mortgages last year and expect to double that amount this year.

One of BSI’s clients, Hometap, makes investments in 18 states, and will invest up to $600,000 in a property. The company has no income requirements, but does require a credit score of at least 500. It takes a percentage of your equity, which varies depending on how long you hold the house. Contracts range up to 10 years, meaning you have up to a decade to either sell the place or refinance and pay back what you owe. However, if your house should decline in value, the company will share in that loss.

Another client, Unlock, also shares in the depreciation of your house, if applicable. And unlike other shared equity outfits, it allows you to make partial buyout payments. The company requires a credit score of at least 500, and it will invest up to $500,000 with a 10-year term. Unlock operates in 17 states.

Yet another firm, Point, casts an even wider net: It makes 30-year investments in 27 states.

The best way to determine how much money you can obtain is to ask several companies for estimates. But generally, the most important factors are your home’s current value and how much you still owe on it. In most cases, the difference between those must be at least 20%.

Also key is the length of the investment: The longer the term, the more funds you can access.

A new rule regarding listing houses for sale allows sellers to opt out of placing their homes into their local multiple listing service, the idea being to give their agents extra time to peddle the place within their own companies and their networks of potential buyers.

But do you really want to withhold your property from the widest possible audience just to give your agent a chance to bank the entire commission, or at least keep the payday in-house?

The evidence suggests that's not a smart move.

According to a study by Zillow, sellers who bypassed the MLS in 2023 and 2024 ended up selling their places for a median of about $5,000 less than those who did. That’s a 1.5% difference.

Another study, this one from Bright MLS, found the difference to be much greater. Across its three main market areas -- Philadelphia, Baltimore and Washington, D.C. -- it found that houses promoted to its entire 95,000-agent network sold for about 17% more than those sold off the MLS. That’s a difference of $53,890 in MLS sellers’ pockets.

A 2014 analysis by two San Francisco real estate agents discovered that the typical seller in their market left more than $200,000 on the table when the house was not listed. And, while not directly about MLS usage, a study by Clever Real Estate found that sellers who used a real estate agent to sell their home earned a profit of $207,500 -- $79,000 more than those who didn't.

Of course, there are good reasons why someone would want to sell off-market. Maybe they don’t want people dancing through their home at all hours of the day and night. Perhaps there’s an elderly family member they don’t want to disturb. Or possibly they don’t want the neighbors to know they are moving.

But generally speaking, you want your house advertised where it will reach the broadest market possible -- where it will be seen by the most potential buyers. And that’s the MLS: a locally run database that agents and their clients can investigate to their hearts’ content.

Moreover, under agreements with local listing services, the giant aggregators like Zillow, Homes.com and Realtor.com compile those listings into a giant dataset, which anyone in the world can peruse. Talk about the most comprehensive possible market.

That’s why the National Association of Realtors has had a rule requiring members to place listings into the MLS within 24 hours of obtaining a signed contract. (There are more than 1 million real estate agents and brokers in the United States, but only NAR members can be called Realtors.)

But some real estate brokerages have demanded that they be allowed to place their listing in their pockets -- hence the term “pocket listings” -- so they can try to sell the house to their favored clients. If they fail, they argue, then they can put the property into the MLS and allow the market to have a shot at it.

After a long and sometimes heated debate -- including threats of lawsuits -- NAR caved to the outliers, amending its longstanding “clear cooperation” policy so that sellers can now dictate exactly how long they will allow their agents to hold their listings out of the MLS. The length of time these “delayed marketing exempt listings” can be pocketed will be up to each individual MLS.

But the Zillow and Bright studies suggest that unless you have a special reason, you’ll do better by listing on the MLS right away.

Zillow found the listing-based price differences were particularly pronounced in communities of color. In majority-white neighborhoods, the difference in sales prices between MLS-listed and non-listed homes was about $3,700. But in neighborhoods made up largely of racial minority groups, the loss was $9,850. Broken down further, the difference was a whopping $13,730 in majority-Latino neighborhoods and $5,580 in majority-Black neighborhoods.

Interestingly, the study also found that both Latino and Black sellers "are more often guided toward listing their homes privately by agents." Indeed, 3 out of 4 minority sellers said their agents recommended a private listing, as opposed to just 1 in 4 white sellers.

Zillow says their findings bear witness to how skipping the MLS “can cause sellers to miss out on the full potential of their housing wealth.” And would-be buyers often “miss out on opportunities for homeownership when homes for sale are only available to a select group.”

Besides the price differentials, Bright’s two-year study also laid bare some other interesting findings.

For one, two-thirds of all private listings eventually make their way to the MLS because they didn’t sell otherwise. And when an office-exclusive property did sell, it typically took longer to do so. Those entered on the MLS from the get-go went under contract faster.

Zillow and Bright are multiple listing services, so their research could be considered slanted. But I haven’t seen any studies that show pocket listings sell for more or sell faster. Until I do, I’m going with the idea that the most reliable way for sellers to get their money’s worth is to market their properties on the MLS.

The allure of selling your home on your own, without hiring a real estate professional, is indeed a tempting one. After all, who doesn’t want to put thousands of dollars more into their pockets by foregoing that hefty 5% to 6% commission?

But only a relative handful of sellers actually go it alone. And those who do often end up incurring many headaches along the way and obtaining less for their places than had they sold in the traditional manner.

For Sale by Owners, or FSBOs for short, make up anywhere from 6% to 10% of the market, depending on the source. But the National Association of Realtors, which represents agents and brokers, says FSBO houses sell at a median of $380,000, far less than the $435,000 median for agent-represented houses.

A study by Clever Real Estate, an agent-client matching service, found that FSBOs earned $79,000 less than sellers who chose the traditional route. That amount is “substantially more” than the typical real estate agent’s fee, the report noted. It’s no wonder, then, that over half wouldn’t recommend going it alone to their friends or family.

One FSBO I know wouldn’t recommend it. Yet he sold his parent’s home in a highly sought-after area in the Maryland suburbs of Washington, D.C., for $100,000 over the asking price without an agent. Not only that, but the place sold within 18 days of putting it on the market. And it needed major work.

It was his and his sister’s childhood home, but it hadn’t been maintained. Among numerous things, he told me, “It had 40-year-old paint and needed an updated kitchen and baths.”

But he is licensed in another state, not Maryland, so he had to figure out a way to get the place listed on the local multiple listing service, which is where most buyers and agents search for houses for sale that meet their criteria.

It never was listed, but the house sold anyway.

At first, he tried hiring a discount broker who, for $300-$400, would list the house on his behalf but he, not the agent, would do all the work. After deciding that was “not worth the cost,” he contacted a local brokerage to find an agent to list the house without taking a referral fee from him.

After several attempts at dealing with the agent, him telling her exactly what he wanted and expected to pay, and her coming back time and again with a listing agreement that failed to follow his directions, he had enough. “At that point,” he told me, “we decided to sell it ourselves.”

This FSBO “would like to see more people” sell on their own. But he also believes it takes more work than most want to put into it.

“For me, this stuff comes naturally,” he says. “But most people don’t want to put (in) the effort. They don’t want to pay a commission, but it takes work on their part, and they don’t want to do it.”

Here, in a nutshell, is how he did it: First, he and his sister cleaned out the place from top to bottom so it was entirely empty. Next, they hired a cleaning crew to follow up behind them. Then he hired a professional to photograph the house, inside and out. And then he used the pictures to create a website.

The site looked exactly like a listing from the MLS, with all the information the MLS contains, right down to the year the house was built and the size of the lot. But where the listing agent’s name would have gone, he put his and his sister’s email addresses and his phone number.

He then placed the entire website on Zillow, a popular listing site that shows houses from all over the country. The listing was free, but it is under a FSBO tab, separate from the regular listings.

Of course, he also priced the house properly -- something most FSBOs fail to do, he says. Because it needed so much work, he priced it below market value. Almost immediately, he started receiving offers over the asking price of $990,000. The eventual buyer, who found the house on Zillow, paid $1.1 million.

There are other key details, too. For example, because the place had just one owner over more than 60 years, the buyer was assured he didn’t need his own title insurance policy. The lender still required title coverage, but a policy covering the buyer was not necessary. On the seller’s advice and that of a real estate friend, the buyer decided to forego his own policy, a savings of more than $1,000.

Overall, this FSBO says the buyer saved something on the order of $40,000 because he did not use an agent, buy title insurance or pay other charges. “It was absolutely a golden deal all the way around,” he says. “Everybody was happy, and not one real estate agent was involved.”

Well, that’s not true. As I said above, the seller was an agent.

Unfortunately, most people don’t sell their homes the way he did. But even if others had the ability to stage their homes, pay for professional cleaning and photography, build a website and place it on listing sites, he says they likely would still fall short.

“When they have to start answering buyer’s questions and (negotiating) details, that’s when they freeze up,” he says. “And don’t even start without having a real estate attorney waiting in the wings.”