A Special Report Presented by Attorney Darren Smith and Appraiser Philip Long

Many homeowners have questions regarding which renovations or upgrades add value to their home. Generally, the renovation or upgrade to their property and the amount of value that the specific item or procedure will bring when the property is sold depends upon many factors. Primarily, from an appraiser’s point of view, the market in which the specific property is located will determine the value. An appraiser must consider the market recognition of a remodel, renovation or upgrade and its influence on the subject when determining the estimated value for a specific property.

For instance, if a single family residence which is 30 years old and has the original composition shingle roof in place, it is likely that the roof is in need of replacement. Does a new roof add value to the home? Well, that depends on what the typical buyer in the subject market is willing to pay for the presence of a new roof. More than likely, a new roof will add little to no additional value under the above mentioned circumstances. Conversely, if a new roof is not installed, the presence of a worn roof in need of replacement may act negatively on the potential sales price of the property.

But what about improvements such as floor coverings, exterior hardscape and landscape, pools and spas and other similar upgrades? Again, there is no set answer and it depends upon market recognition. For instance, pools and spas tend to add value to a home. How much added value depends on the market’s view of this addition to the property and may vary widely depending on the individual marketing area. There are desert communities in Southern California where the absence of a pool appears to affect the sales prices and marketability of the property in a negative manner simply because the majority of homes in these communities have pools.

Upgraded items such as floor coverings are also subjected to market recognition. Tile, marble or slate floors may appear at first glance to add value to a home. However, these additions may add little to the value of the home depending on what is available in other homes in the community. Additionally, these type of upgrades may not necessarily add value to the home but may add to the marketability of the property. In other words, a house with upgrades may not sell for more than one without upgrades, but it may sell first!

While most homeowners appear to remodel their homes for personal enjoyment, comfort or recreational reasons, wise homeowners will consider the effects of the remodeling on the resale of their property before the first board is nailed in place. Below is a guide taken from Remodeling Magazine’s 1998-1999 Cost vs. Value Report. While this report is based on a national average and is not specific to an individual market, it may be of assistance when determining which remodeling venture will bring the best return on the invested dollar.

Getting The Most from Your Invested Remodeling Dollar

(Percent of remodeling costs recouped based on resale value within one year of project completion, national average)

For more information on residential or commercial real estate appraisals, contact Philip Long of Points West Real Estate Services at (909) 465-0065