We all own homes of some sort, right? And it’s easy to forget, as an appraiser, that as homeowners even we get excited about upgrades
to our homes that might not have an effect on the price of our home. We’ve all had those borrowers who want to show us every new gadget or upgrade they might have – from a new pool to something as small as a new fan.
It’s true that those may not mean anything to us when we are wearing our appraiser hats but think back to a fun upgrade you’ve made
in your home. Was it new lighting? New paint? Honestly it can be anything but whatever it was made you happy and gave your home something new that could bring you joy.
Our job is to be as even keel as possible when it comes to naming our final price for the home, but it doesn’t hurt to enjoy the borrower’s
happiness for their new upgrade. You might even get an idea for your own home!
While this answer might surprise you it’s not a simple yes - it’s more of an "if you are lucky".
Pools are great, we all have a moment in the heart of summer when we really wish we could walk out our back door and jump directly into a pool. The heat gets to us and we would give anything for a pool. BUT - you have to take time to think about the whole
picture and not just that sparkling cool water you want to jump into.
If you have the right situation you can make upwards of 7% more with a
pool included in your home. Here are some of the ways the pool could actually make your home more valuable.
You live in a neighborhood that is higher end and most homes also have swimming pools
The style of the pool fits with your home and neighborhood
The pool does not take up your whole yard, leaving room for other things such as swing sets or room for other
The pool has been kept up nicely and looks new
You live in a climate where it can be used year round (looking at your florida, Hawaii and even places like
Arizona and California to name a few)
It’s been customized to also be an enclosed pool (just to piggyback off of the last one reason)
You have buyers who want a pool
Outside of what it will add to the home, you have to think of the money
you will spend to get the pool there and then what the upkeep is. For the pool to be installed you could be looking at anything from $25,000 - $35,000+ for the install. Then you have monthly expenses such as chemicals (which could range up to $100+) a month
and seasonal expenses such as opening and shutting the pool. If you have someone coming out to open and close the pool it can cost $500+ each visit.
Overall the cost of the pool probably won’t be paid back in a monetary
way, especially if you add up the monthly and seasonal costs and add it all in. The important thing to think of though, is that it adds value to your life and family if it is something you truly want. So if it’s important to you and you believe it adds depth
to your life and the memories you can make in the home we say - DO IT!!
External obsolescence is a factor that reduces the value of an improvement because of something external to the property itself. It refers to something outside of the home that is causing a lower property value.
Here are five examples of external obsolescence:
1. Busy Road: This is a very common example of external obsolescence because we can see it in virtually every community to some extent. Homes on busy corners, on main streets or near freeways suffer from extra
noise and traffic, both of which impact property values.
2. Commercial buildings: Residential and commercial uses tend to not mix well in suburban areas. It's usually a negative factor when houses are located next to restaurants, retail, gas stations, etc.
3. Construction of a landfill next to a neighborhood: This can impact the entire neighborhood (not just one house) due to the smell or even the noise of large garbage trucks moving in and out.
4. Railroad tracks: Properties located near railroad tracks will suffer a hit when it comes to home values due to the noise factor. Same goes for properties close to an airport and airplanes' flight paths.
5. High-Voltage Towers: A view of nearby power towers usually results in a hit to property value.
When buying or selling a home it can be difficult to navigate
and pinpoint exactly what is included in your square footage. Most people would count attics and basements but that is not always the case. It is very dependent on how the home has been kept up and what upgrades have been done over the years. This means that
two similar homes in the same neighborhood could have two incredibly different square footage.
So what are the requirements to
be counted as square footage? The space needs to have flooring, wallcovering, ceiling and the ability to be lived in 365 days a year. The last one is typically where things get a bit more confusing. This means that it needs to have windows and heat capability.
The confusing thing is that staircases, pantries and closets can be counted as square footage - even though you can’t technically live in them.
So when would a basement or attic
become true square footage? The easy answer is that it has to meet the requirements on square footage. The more technical answer is that it is all based off of where you live and what your state decides to count as square footage. Attics must also need to
be accessible by a conventional stairway.
This also brings up the questions
about whether or not a bedroom in the basement can be considered an actual bedroom when you pull up information on the home. Just because you can count your basement in the square footage (if your state guidelines allow) does not mean you automatically get
to add in a basement bedroom. There will be requirements by state/city - like windows or being a walk in type basement - that would then allow you to count it as an extra room.
While your real estate agent should
be up to date on what counts as square footage and what doesn’t it never hurts to do your own research. Different areas can have different guidelines and you want to be as knowledgeable as possible. This will help you understand the different valuations of
your home and allow you to ask the right questions.
Appraised value is an evaluation of a property’s value based on a given
point of time. It is the value that the interested buyers bank or mortgage company places on the property.
Assessed value determines the value of a residence for tax purposes and
takes comparable home sales and inspections into consideration. It is the price placed on a home by the corresponding government municipality to calculate property taxes. Your assessed value will typically be less than the market value because they are only
looking at a certain amount to tax you on (typically 80 - 90% of what your market value would be).
Market value is the most probable price that property should bring in a
competitive and open market under all conditions requisite to a fair sale. In plain english it is the price that a buyer is willing to pay for a home, and a seller is willing to accept.
As home buyers/owners and sellers
it is important to know how these all fit into the value of your home. The lower end of the valuation should typically be the assessed value since it is only a percentage of what the home is worth. The appraised value may come in a little higher or lower than
the market value but the final say on the value of your home is almost always the market value. It will more than likely end up being your purchase/selling price at the end of the day. These numbers will all come together to give you a fair price and allow
you to feel comfortable in what you are selling/purchasing.
The appraiser won't know what your home is worth the second he walks in the door...What can you do to help the appraiser? Here are 4 things you can do:
1. Prep your space - declutter, dust, and mop beforehand to show your home in its best light. Also, inform all occupants that an appraiser is coming so everyone is up and out of bed! Appraisers don't judge cleanliness but a neat, organized home
might help you.
2. Get your paperwork in order - gather all the information you have about the house and have it ready for the appraiser. Have a list of major improvements as well as detailed info about the age and condition
of the roof, HVAC systems, and major appliances. This will be very helpful!
3. Don't put too much stock in home improvements - We're sure your brand-new kitchen is stunning, but don't be surprised if it doesn't proportionally raise your home's market value. If you spent $50,000, you're
likely to see only a fraction of that returned in value.
4. Be honest - Before listing, make sure you and your realtor take a realistic look at what your home actually offers. It might be tempting to pad some square footage here and there. However, your appraiser won't
be fooled, so it's best to always be truthful.
A home appraisal is the process of evaluating a piece real estate (can be a residential, commercial or industrial building built on land) and all it’s features to come up with a value of that property. An appraisal is normally performed by a professional
appraiser who is trained to provide their opinion as to the value of the real estate and its building.
A home inspection is the process whereby a home inspector examines a home and all its major components to determine the quality of the components and also provides estimates of the longevity and usefulness of the components.
Which is your favorite? The guy on the dolphin is pretty funny, lol.