Will The Appraiser Give Me Full Credit For My Landscaping?

How Much Value Do You Get For Landscaping?

I was asked this question about landscaping by a homeowner during an appraisal inspection this week. I thought I would share the answer on my blog because I’m sure others have asked the same question.

My answer really doesn’t just pertain to landscaping though. It can explain how appraisers consider different amenities during an appraisal assignment.

Will the appraiser give me full credit for my landscaping

First off I would like to clarify that it’s really not up to the appraiser regarding the value of various improvements but rather what the market data indicates. The appraiser’s job is to study the market to see what the contributory value of an improvement is.

The contributory value, of course, is a measure of how much a certain feature contributes to the overall value. It does not always equal cost and can be more or less depending on how much value buyers place on it. Let’s dive in and see what we find.

5 Factors That Influence Contributory Value

Contributory value is a measure of how much value a specific feature adds to the value of your home. Like I said, it does not always equal cost.

Appraisers measure this by comparing similar homes with the exception of the feature in question. If a home with upgraded landscaping sells for $10,000 more than an otherwise similar home then we know the difference in price is attributed to the landscaping.

In this scenario $10,000 is how much value the landscaping contributes to the overall value of the home. Now let’s take a look at what factors can influence the contributory value.

1) Demand – Simply put, the more in demand a feature is the more valuable it becomes. Even with landscaping, certain types may be more desirable than others.

By studying home sales and seeing what type of landscaping they have we can see what features are popular. We can also see if there are any differences in value when additional features are added such as extensive hardscapes or unique plants, shrubs, and trees.

I’m not saying that an appraiser can determine exactly how much a specific plant adds to value but we may be able to measure whether buyers are willing to pay more for certain upgrades in landscaping. The quality of market data is crucial to being able to measure it so the more data agents share in their MLS listings the better.

2) Cost – The bottom line as I always like to point out is that cost does not equal value. How much the landscaping costs will determine how good your return on investment is.

It’s always a good idea to get several estimates to help ensure that you are not overpaying. By knowing the cost and how much value you can expect to add to your home you can make a better-informed decision.

If extensive landscaping adds $10,000 to the value of your home then paying $12,000 to have it done would not be financially prudent. You would not be getting full credit for the cost of adding the landscaping features.

3) Market Expectations – I should say that many of these factors I’m discussing here work hand in hand with each of the others. When we look at market expectations we want to see what the majority of buyers expect in landscaping.

Market expectations can differ based on the area you are in as well as the price range of home you have. Extensive hardscapes and exotic landscaping may be more common and expected in higher-end neighborhoods.

You will most likely get closer to full credit for the money spent in these areas than you would get in lower-priced homes where the market expectation would be to have sod and modest trees and shrubs.

A good way to determine market expectations is to look around at the homes that are selling and see what they have. Google maps is also a fantastic resource for viewing neighborhoods to see what type of landscaping most of the homes have.

4) What Type of Work Did You Do? – So far I have been discussing landscaping that may be over and above what is typical. Another scenario may involve spending money on getting your landscaping to a minimally acceptable standard level.

What I mean here is that if for some reason your landscaping is far below what is expected in your area then the money you spend may not contribute as much as it would if you were adding a more popular feature that buyers wanted because you are getting it to a level that everybody expects it to be in the first place.

5) What Do The Sales Show? – It all comes down to what the market data shows. Appraisers are paid to study and analyze the market to determine what features move the needle on value.

As I mentioned previously, the more data the appraiser has the more it can be measured accurately. This is why it is crucial for MLS systems to have the most complete and accurate data possible.

Data such as square footage and bedroom & bath count are already accounted for in listings, however other features may not be. It is always helpful to include notes for features of a home that contributed to the final sale price, whether it be a positive or a negative feature.

An old saying is that if you don’t track it you can’t measure it. Appraisers measure market reaction so the more that is noted and tracked the more successful we can be at measuring the buyer’s reaction and the subsequent influence on the sale price.

Question
Do you have any further questions about how appraisers measure the value of landscaping? If so please leave a comment below and as always, thanks for reading.

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Comments

  1. Thanks Tom. I find it’s easy for sellers to expect “full credit” on mostly any improvement, but the market doesn’t always want to pay what something cost the owner. I think your point on market expectations is really key too. Buyers in various neighborhoods and price ranges expect different things.

    • Yeah, I get it. Since I am a homeowner I would like to get a 100%+ return on all improvements but that is not always realistic. There is also an enjoyment value that owners need to consider. I had a client once who understood this and explained that the joy he and his family got from having a pool far outweighed the resale value of the pool.

  2. Hi Tom,

    Great explanation. I ran into this yesterday. A couple spent 80k on their backyard but I found support for adjusting 10k over most comparables.

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