I want a house with equity! What’s the value of this home?

Equity is a position directly related to perceived value in a specific time.  Those who had equity 2 or 3 years ago may now have none.  If the appraiser values it for more than the sale price then the lender will have perceived equity; as the appraisal is specifically for the lender in a specific transaction to determine the collateral value. 

The tax assessor has valued the property at $X, so they would perceive some equity for a sale of a lesser amount.  If the market were to significantly increase or decrease this position would change as well.  Equity is tied directly to value and “value” these days is a hard number to derive.  The value to you as a buyer may be different than the value to the next buyer (needs/wants).  Your value would also depend on the overall condition of the home; pending the home inspection.  The perceived value could be devastated if there were a structural, system, or other high cost issue with the home.

For example:  your comment was “…the home is worth at least $X in the current market”.  I could then say if it’s worth $X why isn’t it selling for closer to that amount?  One answer could be:  it’s a short sale and the agent priced it to move; another: it isn’t being marketed to its full potential as the seller has no funds for clean up, staging, maintenance, etc. OR: trying to avoid foreclosure it’s priced below its “value”….and the list goes on. 

Your perceived value is what its worth to you; the appraiser will have the opinion that matters most to the financing decisions.  If it were not to appraise for the contract price, then you could attempt to renegotiate for the lower amount or pay the difference out of pocket.  Value is an opinion and everyone’s differs.


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