What house upgrades hold the most value in an appraisal?
What house upgrades are the most valuable in the eyes of an appraiser? I asked Sara Goodwin, a guest contributor for Connect2Agent’s Home Buyers and Sellers Blog, to provide a guest post and insight into this topic.
Goodwin specializes in residential appraisals in Northwest Oregon and Southwest Washington. Here is her third guest post, on the subject of upgrades and their affect on house values.
What are the conditions of your local market?
For the maximum return of an investment, one should consider the specific market of the property.
Some markets with warmer climates may put greater value on an in-ground swimming pool. In my market (Northwest Oregon and Southwest Washington), it is often considered a waste of space that gets little use; therefore, it would likely not be wise to invest in a pool for an upgrade in this area as it would likely show a negative return on investment.
In the markets where I work, finished basements have different values. Much of the time, this is due to the size of house rather than the specific area. Home buyers looking for larger houses with ample above-ground living space often do not consider finished basements as valuable as home buyers who are looking at smaller houses where the basement can add much-needed living space.
Useful resources to do your homework
I often suggest homeowners look at the Cost vs. Value Report provided by Remodeling Online for popular upgrades in their area. I ask them how long they anticipate staying in their home, because those chic granite countertops may seem dated in five or ten years.
The most popular approach to value that appraisers use in active markets is the sales comparison approach or market approach to value. In this approach, the appraiser finds three to six of the most similar properties that sold within approximately one mile of the subject within the past six to twelve months (depending on abundance of inventory).
The subject and comparables features are listed on a grid and the appraiser adjusts the comparable property in positive and negative dollar amounts or percentages to determine an adjusted value for each comparable property.
A standard grid that is used includes adjustment fields for elements such as:
- When the property was sold
- Condition of the properties
- Square footage
- Fireplaces
- Heating
The appraiser is responsible for making adjustments based on the area market appeal for each feature. Many of these adjustments are rather standard nationwide, but others are quite dependent on a specific area or region.
Sara Goodwin focuses on residential appraisal services in Northwest Oregon and Southwest Washington. To contact Goodwin, call her at (503) 943-9200 or email her. To learn more about Goodwin’s appraisal services, please visit her website.
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Posted by Rebecca D. Levinson