What is a property worth?

What is a property worth?

People constantly ask me this question and truthfully it is not an easy question to answer. It really depends on who is asking. We can put most of them into three categories: Buyers, Sellers and 3rd parties.


The way a bank determines what a home is worth is through an appraiser. The appraiser looks for the maximum value and best use of the home. For example, maybe the land is worth more than the house that’s on it. Then the appraiser takes a few similar properties from the same town that have sold recently and adds or subtracts from the value for improvements or location. The bank does this, because if the buyer does not keep up with their mortgage, the bank might have to foreclose on the property. If that happens, the bank wants to make sure the buyer did not overpay, so that the bank can recoup their investment.


How much a buyer is willing to pay for a home all depends on their needs. Do they have a need for a lot of bedrooms? Would they like more land? Do they need to be close to public transportation? All these things make a difference in what a buyer is willing to pay for a home. A single person commuting on a train will most likely not be willing to pay as much for a four bedroom home on one acre of land miles from any train station, as would a family of four.


What a seller thinks their home is worth has a lot of variables. Too many times I have heard homeowners say “I did not sell my home because no one will pay me what my home is worth.” Sometimes that’s true, but most of the time it’s because the home is overpriced. You can tell if this is the case if similar homes in the same price range keep selling and theirs does not. Now, when they do get offers on the home, a seller will not always take the highest priced offer. It can vary due to closing date (carrying an empty house costs money), or whether it is a cash offer (usually it’s a faster process with fewer headaches – like no appraisal). The seller could be an old couple, they might get sentimental and sell it to a young couple for less money, because the buyers plan to start a family in that home.

In the end, the maxim: “Something is only worth what someone is willing to pay for it,” is mostly true. The exception is if the buyer has multiple offers but accepts one that is not the highest. There is also: “He who has the gold makes the rules.” If a bank will not give a loan to the buyer for the amount they need because the appraiser valued the home at less than the offer, then the sale most likely will not happen, unless the buyer comes up with more money or the seller reduces the price of the home.

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