Just to keep us on the same page, in this article I am referring to an improvement as a change to an existing structure and not to the initial construction of a building improvement.
Many owners want to know, and ask appraisers, how much a specific improvement, addition or "upgrade" to their property adds to its value, or how much would it potentially add if they decided to compete it. It's important to understand that for appraisers there are no fixed percentage or flat amounts that apply to every improvements. Yes appraisers use cost manuals to estimate the depreciated replacement cost new of improvements, that doesn't mean that improvements add to property value on a cost dollar spent to a market value dollar increased basis.
It's true that residential appraisers will use an adjustment range for an improvement like a swimming pool, but even adjustment ranges don't apply to all situations. How much an improvement will add to property value has to do with the neighborhood, the demand for the feature and its cost. Either an improvement contributes to (and adds to) value or it does not.
If your improvement is really a repair, like new shingle roofing, then you may see no value subtracted from the appraisal after the repair is made, but it's also likely you won't see a large upward adjustment in the appraisal for the item being recently repaired. In fact you may spend a great deal of money on an improvement and an appraiser may add little or nothing to building value for it. You may have simply brought the improvement to an "average" condition.
Many owners think that the tenant improvements made to their commercial building add significantly to building value, but they may not, potential tenants may even find the improvements detrimental having to remove them in favor of their own planned use.
Residential upgrades are much the same, you may think that your improvements will add value and the first thing a buyer wants to do is remove them. I have seen buyers remove $ 15,000 in new carpeting the week following closing.
While there are circumstances when improvements must be made to make a property marketable, or to enhance their value, there are other situations when improvement money is wasted. Before you spend money on value enhancement via building improvement make sure you understand the potential risks and rewards.
For more appraisal information contact Glenn Rigdon
, MA,MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal
), or you can also click on “Contact Us” on the home page of this website.
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