As the weather cools off, many of us start thinking about ways to improve our properties. When we upgrade our homes we do so for our own enjoyment, but, we also hope that the money we spend on our homes will add value to our property.
We regularly meet with appraisers to get insight on how property is valued in the current market. Having a sense for how appraisers evaluate property is beneficial whether you are looking to invest in your current property or purchase a new one. Some of these answers may surprise you, but we hope it helps you make decisions as to which home project to take on next.
Pool – Appraisers will give a pool an average of $20,000-$50,000 worth of value on an appraisal. If you have done extensive backyard upgrades (hardscape, structures, water features etc.) appraisers will still not give you any more than 10% of the value of the home. However, buyers definitely value pools and are willing to pay more in the market for a home with a pool (depending of course on the condition of the pool).
Kitchens and Baths – Remodeled kitchens and bathrooms can yield a 100% return on investment pending they were done within the last 3-5 years of the sale. The 10% rule noted above also applies which means an appraiser could give a full kitchen renovation $60,000 worth of value on a $600,000 home. Buyers love new kitchens and baths and will pay a premium for upgrades that they do not have to undertake.
Fireplace – Appraisers only give a fireplace $1,000-$2,000 of value on an appraisal whether they are inside or outside.
Flooring - New flooring can radically change the look and value of a home and appraisers will usually give equivalent value for the upgrade cost. Buyers also love updated floors and they are willing to pay more in the marketplace for the upgrade.
Mechanicals – Appraisers do not give a specific value for a new roof, new HVAC, new plumbing, or updated electrical. Interestingly, on homes that have been fixed and flipped by investors, the home mechanicals are rarely upgraded. Flippers usually upgrade kitchens, bathrooms, paint, and flooring because they can get a higher return on investment on those items from buyers and appraisers. But don’t worry, newer mechanicals do enhance the overall condition of the property and that is taken into consideration by appraisers and smart buyers.
Paint – When appraisers value the condition of a property, new paint is definitely noted and it is the quickest and cheapest way to update a home and enhance property value. Buyers and appraisers alike will value freshly updated paint in a manner equivalent to the cost. Just be sure to know the color trends before you paint!
Lot Size and Upgrades – If lots in the area are all roughly the same size, appraisers do not typically give more value for a bigger lot unless it is substantially larger (by 50%) than the surrounding properties. If you have a cul-de-sac lot or back to open space, that may be worth up to 5% of the value. A golf course or view lot may give as much as a 5-10% boost over a non-view lot.
Solar – If your solar system is leased, appraisers will not give you any value for your solar. If your solar system is owned, an appraiser may give you a .5%-2% adjustment depending on the size of the system and the home - but this is dependent on the appraiser.
Updated Furnishings - We feel like buyers are having a harder time looking past the interior decor of a home to see the quality of the structure. We recently had a home with updated ACs and every buyer was far more interested in the beautiful Restoration Hardware styled living room than the upgraded mechanicals - and the furnishings were not even for sale! New home builders really understand this psychology which is why they always expertly stage their models. So know that restyling your furnishings in a more updated way can increase your value in the marketplace even though it may not be a direct value adjustment on an appraisal. Furnishings are also an upgrade you can take with you!
Upgrading and modernizing your home for your own enjoyment really does improve the value of your property in the long run. Not sure what projects to do first? Give us a call! We regularly help clients figure out what to tackle next and help them invest wisely!
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