Appraisal term of the day: Effective Age

Impress Your Friends With This Cool Appraisal Term

So you’ve put a lot of money and hard work into your home to make it look better in order to list it for sale, now what? People ask me all the time how these improvements in their home are considered by the appraiser so I thought I would give you some insight into how we look at it and its effect on the final appraisal value. Just so you will know, the improvements you make to your home does add varying amounts of value, however another result is that it can reduce its effective age. What is effective age you may ask? Effective age is the age your home “appears” to be, and it can be more or less than the actual age.

Repairs and Renovations Do Count!

If your home has had significant updates and has been well taken care of, then its effective age will most likely be less than the actual age. If the home has not been well taken care of and has items that need repair then the effective age will probably be more than the actual age. Take a look at the picture below. The home has had significant renovations, and as you can see in this picture of the kitchen it appears a lot newer than its actual age.

Just so you know, appraisers do look at and consider any and all work you do to your home, however some types of improvements are given more consideration than others and it is important to know exactly what appraisers are looking for so that you can focus on the important stuff that will have the biggest impact. Honestly, people have pointed out home improvements ranging from changing out cabinet knobs (no significant added value) to entire additions to a home (huge impact on added value), but some things contribute more to value than others.  There are some improvements that add more to the cosmetic appeal of a home than its bottom line dollar value. One other thing to think about is the cost of the improvement. I’ve written in the past about how to get the most bang for your buck, and you want to make sure that the value you get out of an improvement is more than it costs, or at least know what you’re getting in to.

Any type of improvement that is not part of the house structure will not be considered and has no effect on effective age. Examples of these include curtains, removable window blinds, area rugs, furniture, and some non built-in appliances like refrigerators. These types of items can add to the cosmetic appeal and livability of a home but can be removed and therefore are not part of the real estate and do not add to the longevity of a home. Examples of improvements that are part of the home and that will help add years to its life include built-in plantation shutters, remodeled kitchens or bathrooms with new cabinets and flooring, replacing the roof cover, painting, and adding an addition to the home.

Two Ways to Look at Effective Age

One thing I should add is that improvements that update a home so that it  is more in line with what is expected in today’s market can extend its life as well. A perfect example might be adding a bathroom to a home that only has one bathroom but where two bathrooms are expected by home buyers. Anything that you do to the house that is part of the real estate and that extends its life physically (making the bricks and mortar last longer) or economically (making buyers want to buy it because it competes well with other properties) will lower its effective age and increase its value.

The benefits of lowering a home’s effective age is that you can compare it to other remodeled homes which typically sell for more than homes that have not been remodeled. If the home is in a neighborhood where little to no renovations are present, it is possible to compare it to a newer home that has a similar effective age, which also typically sells for more than the non-remodeled older home. I hope I have shed a little light on effective age and how it relates to improvements you make to your home. If you have any questions please let me know, I am interested in hearing your thoughts.

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