Whether a home owner has owned their home for 30 years and has paid off their mortgage, or is one who has owned their home for only a few years and has an equity loan on top of the original mortgage, the market value of their home is what it is. Market value has nothing to do with mortgage balance, whether the home is in Iselin, New Jersey, Colonia or Edison, in Woodbridge Township, in Middlesex County or in any other state.
Likewise, where the owner is planning on moving to another home, what they need to spend for their next home does not have an affect on the value of their current home. Their home is worth what is worth, whether they are moving into a home they already own, buying a less expensive home or are purchasing a much more expensive home. Market value has nothing to do with the amount the owner needs to purchase another home.
In either scenario, there is a reality however. In order to sell a current home, there needs to be sufficient sale proceeds to pay off the existing mortgage(s) and, or, provide enough equity to enable the purchase of the next home. For many owners, it is a matter of choice. Is it worth it to me to sell my current home and move forward or not? For others, the options are not that simple.
Home buyers make their purchase price decisions based on how much a home is worth to them, not on how much the seller is asking or how much the seller needs. Buyers look and compare one home to another. They ask to see comparable sales, and they base their contract offer on what the real estate market is saying the value of the home is. A home buyer will not pay more for a home than it would cost them to find a similar home, in similar condition and with similar amenities, commonly known as the “principle of substitution”.