What You Paid, What You Owe & What Your Home Is Worth

One of the conversations I find myself having with sellers is the difference between information that’s important to them and information that’s actually going to determine what a buyer is willing to pay for their house.

Those aren’t always the same thing.

I recently prepared a CMA for a seller, and when we talked afterward, three things kept coming up: her mortgage balance, an appraisal from a couple of years ago, and repairs and improvements she had previously made to the property.

All three mattered.

Just not necessarily in the way she initially thought.

Your Mortgage Tells Me About Your Situation

I absolutely want to know what you owe on your property.

Your mortgage balance helps us estimate your equity and what your potential net might look like after the sale. It may even help you decide whether selling right now makes financial sense at all.

Sometimes that number becomes a line in the sand.

If the market supports a certain value, but you need substantially more than that in order for selling to make sense, then we may determine that now simply isn’t the right time to sell.

But what you owe doesn’t determine what a buyer is willing to pay.

A buyer isn’t looking at your mortgage balance and deciding how much you need to walk away with. They’re looking at your house and comparing it to the other options available to them in the market.

An Old Appraisal Is Useful, But It Isn’t Today’s Market

The second thing we discussed was a previous appraisal.

If you have one, I absolutely want to see it. It gives me another piece of information about the property.

But an appraisal is an opinion of value as of a particular point in time.

Since then, other properties may have sold. New listings may have entered the market. Inventory may have changed. Buyer demand may be different. The condition of the property itself may have changed.

So an appraisal from a couple of years ago can be useful information without necessarily telling us what buyers will pay today.

The question isn’t only:

What was the property worth then?

We also have to ask:

What does today’s market support?

Past Repairs Don’t Always Equal Current Value

The same principle applies to repairs and improvements.

Maybe you renovated the property several years ago. You installed new flooring, painted, updated the kitchen or bathroom, or made other improvements.

I want to know about those things too.

But we also have to look at what condition those improvements are in today.

If a property has been occupied for several years and experienced normal wear, tenant damage, deferred maintenance or other changes, we aren’t selling the house as it looked immediately after the renovation.

We’re selling the house that’s standing in front of the buyer today.

Some improvements absolutely can contribute to value. But money spent doesn’t automatically translate dollar for dollar into additional market value.

Current condition still matters.

Before We Get to the Bank’s Appraiser, We Have to Pass the Buyer’s Appraisal

I don’t mean that the buyer is literally an appraiser.

But before a lender ever orders an appraisal, somebody has to look at your property and decide that it’s worth making an offer on.

Buyers are comparing.

What else can I buy for this amount?

What condition is it in?

How does the layout compare?

What features am I getting?

What are the other houses in this price range offering me?

In that sense, the buyer is making their own determination of value before we ever get to the formal appraisal.

So What Does Determine the Price?

This is where I bring the conversation back to today’s market.

I’m looking at the solds because those transactions show us what the market has already proven.

I’m paying close attention to the pendings because they give us insight into where buyers are making decisions right now.

And I’m looking at the active listings because those properties are your competition.

Then we compare the property itself: condition, layout, square footage, bedrooms, bathrooms, improvements, days on market and the seller’s timeline.

That’s where our pricing conversation starts.

Your mortgage matters because it helps me understand your financial position.

Your previous appraisal matters because it gives us additional information.

Your improvements matter because they help tell the story of the property.

But none of those gets to dictate what somebody has to pay you today.

Your history with the property helps me understand your situation. Today’s market helps me understand your price.

Watch the Full Conversation

I broke this seller conversation down further in the latest episode of Road to 50 Listings.

If you’re considering selling and want to have a conversation about what the current market may support for your property, you can also schedule a Listing Strategy Call with me.

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