Chapter 3-How to increase the appraised value of your home.

Real Estate Appraiser with Lanier Appraisal Service CR004373


Other items under quality of construction is lighting and floor coverings. Do you have hardwood floors, tile, marble or vinyl. Is the carpet plush, berber, sculptured or shag. Do you have upgraded fixtures. As far as the bathrooms are concerned, do you have tile in the baths, a jetted or garden tub, double vanities, etc. The more upgrades overall, the better the quality and the higher the value. The kitchen and baths still rule. Do you have upgraded appliances, granite or corian counters as opposed to laminate counters. Do you have custom cabinets...all of these items add to overall impression of value. BUT before you go out and change your home, make sure that these upgrades will be supported in the market and in your neighborhood. In other words...NEVER over improve your home for your neighborhood.

If you have the largest and most improved home in your neighborhood, this will hurt you as the other homes that have sold in your neighborhood will likely be the sales that the appraiser will choose to compare to yours and they will bring your value down, rather than up.

If you have a home valued at $100,000 prior to improvements and the neighborhood has homes valued from $75,000 to $150,000, you do not want to add $50,000 to your home to get it to appraise for $150,000 as you will not realize a dollar for dollar value on your improvements, especially in this price range. As a general rule of thumb, you get about 50-60% return on your investments up front, BUT THIS CAN BE DIFFERENT IN DIFFERENT MARKETS!

There is typically a higher return for Kitchens, Baths and Landscape costs, as long as they are not excessive or unusual. As more time goes by and home values continue upward (assuming you are in a market with gradually increasing values) you will realize a higher rate of return on your renovation/investments. Unfortunately, I cannot give you a list of improvements and exactly what the return on investment will be as there are so many other variables that come into play that it is impossible to do this. However, I will give you as much specific information as possible so that you will understand what things will have the largest impact on value. What you can SEE, many times has the greatest impact as opposed to underlying improvements that are not readily visible to a potential buyer. Such as new roof shingles as compared to a sophisticated heating and air system or specialized windows or foundation system, that most potential buyers do not appreciate, unless you are dealing with a high end priced home.

If you know of a local appraiser that you feel will appraise your home objectively, especially if you have a special or unique property that requires an appraiser who has experience appraising this type of property, currently you can request that the lender use the appraiser you prefer. If you are refinancing or purchasing your home, tell the loan officer that you want to use your own appraiser otherwise you will have to take your loan elsewhere. 90% of the time they will let you use your own appraiser as they do not want to lose your loan business. (Due to some new regulations that are coming down the pike (refer to my HVCC BLOG) this may change and you will not have control over what appraiser will appraise your home, but you do STILL have the power to rebut the appraised value if you feel it is FAULTY!

We specialize in Lake Properties and there have been horror stories when the lenders used appraisers from out of the area that knew very little about the lake. The comparable sales (sales of similar type properties in your neighborhood) will determine the value of your home and if they do not use truly comparable lake homes, with similar views, topography, water depth, lake frontage, etc...this could mean literally thousands of dollars on your appraised values, many times thousands lower than what your home is actually worth.

If you are selling your home, then the buyer's lender will chose their own appraiser and you have little power in this situation, except to decide to have an appraisal done BEFORE you place your home on the market. This is perhaps the wisest thing you can do for yourself. The appraisal fee is worth it many times over, not to make a several thousand dollar mistake on the pricing and marketing of your home.

You just contact an appraiser, hire them to appraise your home and then you can use that appraisal in your marketing package. This helps to discourage "low ball" offers, as you can present the appraisal as proof of value, from an objective third party who has no vested interest in your home.

This is especially helpful if you have a home that is not typical for the area, as noted above (lake, acreage, custom home, etc.)

If you are purchasing a home, you have a choice of having the appraisal done after you put together a contract on the home. Make sure that the sales contract says: "Purchase contingent upon the home appraising for at least the contract price or above". I would suggest, however that you get the appraisal done BEFORE you put a contract on that home. You want to make sure that it is worth what the seller is asking for the property. This will save yourself and the seller a lot of headaches later if value is a problem.

Other items the appraiser looks for is the condition and working order of your main working systems such as plumbing, electrical, appliances, heat and air, etc. If you are on a septic tank, they check the yard to make sure there is no evidence of malfunction or backing up, which would show up in your yard. They check overall functionality of your home and how it compares to the neighborhood. If the neighborhood has mostly 3 bedroom 2.0 or 2.5 bath homes, you do not want to have the only home with 2 bedrooms and 1.5 baths.

If you have a home with a basement, you don't want all your beds and baths down there. It is very important to understand that appraisers view homes with basements very differently from Realtors. Appraisers look at what is included in the GLA (gross living area). This area is defined as that which is above grade (the area above the ground all the way around your home.) Most basements have at least one wall below grade or ground. The value per square foot is higher for above grade square footage.

Therefore, even though you have a ranch on a full finished walk out basement and each level has 1,400 square feet, the appraiser will view the home as a 1,400 square foot residence with a full finished basement. If you have only 1 bed and 1 bath on that main level above grade, then the appraiser has to find at least 1-2 sales that have that same type of room count as yours, which can hinder your value. The appraiser has to show this as a 1 bed 1 bath home in the report, even if you have 2 more bedrooms and 1 full bath in the basement.

Don't get me wrong, you DO get credit for this finished lower level in the appraisal, but again, value per square foot for below grade space is less than above grade space. You do not get the credit that Realtors give your home. They will market this same home as a 3 bed 2 bath home with 2,800 square feet of heated space.

If it is not common in the area to have a 1 bed 1 bath home, comparable sales may be hard to find and will likely be homes of lesser value due to the room count. Therefore, your appraised value could suffer. If you are contemplating building a home, please keep this in mind! Build according to what is typical for the area. If you do not then your appraised value may suffer due to its uniqueness. There is a section on the market grid of the appraisal report that addresses design and appeal and if you have the only log home in an area that has all traditional 4 bed 2.5 bath homes, most appraisers will subtract thousands of dollars off your appraised value for this unique home.

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Sara Goodwin
Ashcroft & Associates - Portland, OR
Portland, Oregon Appraiser

This is certainly worth the italics:

"NEVER over improve your home for your neighborhood."

I think the cost vs value website is interesting and sometimes helps people understand that they may not get out of their improvements what they put in to them.

As far as Realtors and Appraisers treating basements differently... I understand that they do, but it seems like trickery when I see a '2,000 sf house!' listed and it's quite obvious that half of that is subterranean... and when it's purchased, it is sold at a similar price range to other '1,000 sf houses with 1,000 sf basements.'.. not like the (usually higher) price ranges of the '2,000 sf above ground houses' (although most folks would love us to compare the two if it helps their cause).

May 21, 2008 03:15 AM #1
JoEllen Stranger-Thorsen
Eustis, FL
Lake County, FL

Great information on all aspects. I live in Florida so basements are a rarity, it's good to know how an appraiser views it.

May 21, 2008 06:04 AM #2
Christina Cavins
Irongate Inc. REALTORS - Centerville, OH Search Ohio Homes For Sale

Great post, Mary! Please contribute to my "increase home value tips" post here



Jul 07, 2008 05:20 PM #3

This is the first piece of information I've seen which explains why the refi appraisal on my house came in abysmally low.  We bought the house in 1998 (located in a prime neighborhood in Seattle) for about $900,000.  It was marketed as a 5,000+ square foot house. It is worth well over $2 million today, but an appraisal done last week came in at about $1.57 million.  The above ground living area is close to 3,000 square feet, but only has 2 bedrooms and 2.5 baths (there is also an office, but it doesn't count).  The remainder of the square footage is in the basement, which is completely finished with another 2 bedrooms and 2 baths.   I understand that basements are worth less per square feet to an appraiser, but the difference was was over 10:1 -- about $500 per square foot for the above ground living area, versus about $40 per square foot for the basement!   

Aug 15, 2008 10:30 AM #4
Mary Thompson
Lanier Appraisal Service - Flowery Branch, GA
Lake Lanier Appraiser in North Georgia

That is quite a difference and should be looked into. It should not be that different unless the market clearly is only paying $40.00 per square foot for this lower level.


Thanks for your comments

Aug 23, 2008 07:25 AM #5
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Mary Thompson

Lake Lanier Appraiser in North Georgia
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