When an appraiser is evaluating your home, you may feel like the value is a reflection of you as a person. It really isn’t. From an appraiser’s perspective, I’m looking at the overall condition and interior finishes throughout your home. Things like windows, walls, ceilings, floors, countertops, cabinetry, etc. I’m evaluating your home as if a typical buyer is walking in trying to decide how much to pay for your house, not your “stuff”.
Condition Versus Appeal
There are times when I am doing an appraisal observation and I am told ALL the things the homeowner has done to the house. Like..ALL.THE.THINGS. And while it is helpful to have a list of updates and maintenance items you’ve done to your home when getting an appraisal, replacing the garbage disposal, really isn’t up there in the list of things that add value to your home. Replacing a broken garbage disposal does have its place in keeping on top of the overall maintenance of your home, But I can’t base my analysis of sales using a new versus old garbage disposal variable.
I separate things that add value into two camps. There are things that contribute to the overall condition of your home (i.e. how well you have maintained the existing structure) and then there are things that contribute to the overall appeal of your home (i.e. the type of finishes you have such as granite countertops vs laminate countertops, tile shower surrounds versus fiberglass, etc). In my reports, you will see something like “C2” or “C4” in the condition line. These are condition ratings defined by the Uniform Appraisal Dataset. Here is a list of condition ratings and their definitions if you’d like to have a look. The ratings go from C1 (a newly constructed, never before lived in home) to C6 (A home on the verge of being torn down). Lenders typically do not lend on C5 and C6 homes.
Replacing or repairing things that are over 10-15 years old, like your garbage disposal, your water heater, your HVAC system, your roof, your window screens, patching the holes in the drywall, cleaning grout lines, getting carpets steamed, etc., will likely bump you from a C4 to a C3 rating. But it is the overall condition that counts. So if everything else in the house is on its last legs, but you just remodeled your hall bathroom, it will not likely be enough to move you to a higher condition rating.
As an appraiser, I am looking at the cumulative effective of how well you’ve maintained your home and whether it is showing more or less of its age due to normal wear and tear.
Cost Versus Value
In this poll 64% of appraiser respondents said they see 4-9 houses a week (44% said 4-6 and 20% said 7-9). That’s 208 to 468 houses a year! So I think it is safe to say that appraisers have a pretty good idea of the attributes that appeal more or less to a typical buyer.
There are certain finishes and amenities we see in the market that increase value. For instance, a remodeled home with newly remodeled kitchen and bathrooms, new flooring, paint, fixtures and stainless steel appliances is going to sell for more than a home similar in size and floor plan with an all original interior. In Arizona, a home with a pool will sell for more than a similarly sized home without a pool. Likewise, there are certain items that have a diminishing return in value. These items may be super adequate for the market, meaning, a feature whose cost exceeds typical costs leading to a diminishing return on the feature.
For example, picture you live in a neighborhood where most homes are very similar. All the houses have 3 or 4 bedrooms and a 2 or 3 car garage, the price range in this area is between $300,000 to $400,000. But, you decide to add 4 more bedrooms and a brand new detached 4 car garage. So now you have 7 or 8 bedrooms and 6 or 7 car garage spaces. It cost your $200,000 to add these features, so you’re house is now worth $500,000 to $600,000 right? Nope!
Why not!? You ask. Well, because you’re forgetting the basic principles of real estate, location, location, location. The home values where you live are going to affect how much return you get for costly amenities. In some areas, things like Thermador or Wolf appliances are expected, in others, they exceed what a typical buyer would want, need, or afford. A new $6,000 stove in some communities is not going to see much (if any) higher return than a new $600 stainless steel stove. A 7 car garage is not going to see much more return as a 3 car garage in certain communities. So in your next project, consider the price range of homes in your area before splurging on super adequate finishes. Unless you plan on living in the home the rest of your life or you simply just want to enjoy these amenities, don’t expect that much higher return on items like these.
What You Can Do
Talk with a local, trusted, realtor, particularly one who regularly represents buyers. These are boots on the ground real estate professionals interacting with buyers and can see what houses their buyers are turned off by and which houses solicit multiple offers. They can tell you what features offer the most buyer appeal and which ones don’t.
Talk with a local appraiser. While realtors have a lot of insight when it comes to what buyers like, the sheer volume of homes that appraisers typically see in a year is leaps and bounds above what a typical agent will show or sell in a year. Appraisers are more focused on overall trends of what has sold for what price and analyzing the most salient features affecting that price. So consult with an appraiser if you plan on doing big projects like pools, solar panels, or a complete remodel to find out which features in your market will attract the widest pool of buyers and what you’re likely to see in your return on investment.