What is your house worth?

Every-time I do a refinance I have to ask the following question of my client – What is your house worth?

Zillow.com, the opinion of a local Realtor, the fact that the next-door neighbor just sold their house for ‘X’… all of this means nothing once I ask this question.  Every homeowner thinks their house is the ‘best on the block’, is ‘special’ in some particular way, or is worth more than other homes in their neighborhood.

I can’t tell you how many times I’ve heard some variation of the following statement:  “how much is my house worth, well, that’s a good question.  A similar house around the corner just sold for $500K, but I’m sure mine is worth at least $600K”.

At the end of the day, every house is special.  Every home is ‘better’ or ‘more valuable’ than the one around the corner… to the actual home owner.  A home is a special place.  Homeowners have every right to feel like their home is more valuable than their neighbor’s.

Unfortunately, to an appraiser, determining the value of a given property is a fairly simple math equation.  An appraiser is generally going to evaluate the prices of recent sales within 1 mile of the subject property that have sold in the last 30 days – 4 months.

Is a pool valuable?  Yes.  Will is increase the value of ‘Property A’ over the value of ‘Property B’ by $50,000?  No.

Is a great sense of style, a clean house, and great interior decor going to influence an appraisers opinion?  Probably.  Will it increase the intrinsic value of the property by $50,000?  Probably not.

So what I have started to do is rephrase the question.  My new question to my clients are “What are properties in your neighborhood selling for?”

This is my attempt to separate the emotional value of a home from the actual value of the property.   If you are a lender or Realtor, you might want to approach this conversation in the same way.

As always, please don’t hesitate to contact me with questions at TrustYourLender@gmail.com