Appraisal Articles 2018 Free Appraisal Articles for Appraisers and the Public
There are a number of articles on the internet today that discuss this subject of value added by upgrades and amenities but few if any are written by appraisers. Since real property appraisers make critical decisions about the contributory value of single-family residential (SFR) home upgrades and add-ons daily I thought an appraiser's perspective may be welcome.
Of course it's common sense to know that the features and upgrades that cost the most money, like remodeled a kitchen or adding an in-ground pool, are the improvements that add the most value. What homeowners want to know however is which investments provide the best return based on the investment made in those improvements.
Buyers want "move in ready" homes and appraisers understand that things like deferred maintenance can bring down market value on more than a dollar-for-dollar basis as discussed. Not keeping up your homes maintenance can be severely detrimental to its market value since the last thing a home buyer wants to deal with is a painting, rotting, water damage, roofing, plumbing, electrical or heating / cooling problem. Even relatively minor cosmetics things are things that buyers need to do and those things create a huge buyer disincentive. Buyers realize that the first thing they have to do is come in and fix your problems. Take the actual cost of fixing the problem and multiply it by three to five times, that's the "opportunity cost" of deferring the maintenance and shifting it to a buyer. So bringing your home to a "move in ready" state provides the highest return.
While curb appeal is often mentioned by agents and articles as important, large lot size with some privacy in Nevada is something buyers look for even more. In many tract home developments, in which most typical Nevada homes fall small "compact" home lots that make you feel like your rear neighbor is on top of you and looking down into your home and yard have become typical. Some neighborhoods have no street parking available which is a challenge for all of the monster truck enthusiasts.
Investing in curb appeal is generally not cost effective. You can spend thousands and if you had an average yard you may get none of your investment back.
Most homes in Nevada were built after 1975 so most are less than 45 years old. A relatively uniform quality of construction has been used in the construct of those home and upgraded materials and atypical features are relatively obvious to buyers, sellers and appraisers.
There are external influences that can add value like Las Vegas Strip views, mountain views and golf course frontage. Many homes fall within luxury master planned golf communities. Onsite improvements can also influence value with improvements like zero edge pools, spas, outdoor kitchens, elaborate decks / walkways and casitas.
Most Las Vegas homes have average to good quality interior finishes but builders generally don't aspire to an excellent quality that would require things like marble floors, rare wood finished dens and extensively finished vaulted ceilings.
Appraisers ask themselves questions about conformity. You may have had the very best contractors come in and remodel your home but if the neighborhood contains properties in the $ 250,000 to $ 450,000 range do you really think that $ 650,000 is reasonable? If you do I feel bad for your real estate agent and your appraiser.
An average built-in pool with concrete deck in Henderson, NV costs about $ 35,000 to construct but appraisers generally adjust them at about $ 20,000, thus they might be fun to have but they are not a great investment. When you consider maintenance and power costs they are an expensive luxury.
An additional attached garage costs about $ 7,500 but I often adjusted them at $ 4,000 per bay, again not a great investment. Additions can cost between $ 70 per SF and $ 140 per SF but are usually are adjusted at 40% to 60% of cost.
Cosmetic items can be worthwhile, and many owners and agents recognize that paint and attention to detail can make a difference with relatively little money being spent. You hear this from everyone but it’s true you need to control your investments in remodeling, renovation and upgrades.
You love the "flipping" TV shows and they make all kinds of investments and get it all back, so why can’t you. Their “costs” are usually materials only so you are seeing 50% of what the real remodeling / renovation costs really are, and they are experts and doing what needs to be done to get a property sold. They say “if we put $ 4,000 into this kitchen it will be worth it” and the materials alone are $ 6,000, who is going to put them in for $ 0? If you think you can do it maybe you should be out there flipping.
If you are thinking about an upgrade to enhance value my suggestion is stop! In most cases you are not going to get your money back. If the improvements are in place you will likely get a percentage of your costs back but usually you are not going to get all of your money back or a big bonus. If you buy a property below-market because it needs upgrades / repairs and you can do the work yourself of course there is an upside potential.
For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/
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