Suzanne Plewes, RE/MAX Alliance in Loveland
There are so many ways to answer this question. Some interpret it as “how much is your home worth to you?” Others may answer by how much a home is worth to a buyer. And yet another way to look at it is how much is a home worth to a mortgage lender. These questions often have different answers. When it comes to selling your home, how much your home is worth is actually a combination of all three questions… to some extent.
What a home is worth to you
When you own a home, there is an emotional attachment that will undoubtedly lead you to give it more value. You may end up considering the price paid for it, improvements made over the years, etc. Unfortunately, those figures don’t always reflect the value of the home in the current market.
When it comes time to sell, you may be faced with comparing the market or buyer assigned value of your home to its personal value to you. When those two figures are far apart, you might decide not to sell. When the figures are closer together, then selling becomes more feasible.
Appraised value of a home
The appraised value of a home is based on recently sold comparable properties. It is therefore always fluctuating. Comparable properties are similar in location, style, size, acreage, condition, and features. Since it’s rare to find an exact match, adjustments are normally made for differences between available comps and your property.
Lenders use market value (as determined by an appraisal) to determine how much they are willing to lend a buyer to purchase your home. The loan amount is normally a percentage of purchase price OR market value, whichever is lower. Since most buyers on the market require a mortgage to purchase a home, market value (or appraised value) is extremely important.
Buyer assigned value of homes
You’ve probably heard that “the value of a home is what a buyer is willing to pay for it.” Sometimes that value is below market price, in which case a home may sell for under list price.
Sometimes it is more than market value, based on available inventory and competition. It is important to note that what a buyer is willing to pay for a home is not necessarily equivalent to what he can pay for it, especially when a mortgage is involved.
So, what is your home really worth?
Ultimately, how much your home will sell for will be a combination of all three things. It must reflect what the home is worth to you, what a buyer is willing to pay, and what the home will appraise for. In an ideal world, those three figures fall in line and lead to a smooth closing. However, in many cases, one or more parties must shift their valuation to make the deal work. No two scenarios are the same, so it’s important to have a realistic discussion with your agent about home values and what to expect under current market conditions.
By Suzanne Plewes, RE/MAX Alliance. Suzanne Plewes is a broker associate at RE/MAX Alliance. Write to 750 W. Eisenhower Blvd., Loveland, CO 80537, call 970.290.0373 or e-mail [email protected].
