During a home renovation an appraiser can be your best friend
A home renovation can be an exciting time for owners. You’re making changes to your home that will create the perfect house for you and your family. Whether it is building an addition, finishing off an attic or basement, or giving the house a complete facelift, this type of project can help increase the value of your home. The question is by how much?
During home renovation projects it’s easy to get so excited about the outcome that you don’t consider how much the project costs versus how much actual value is added to your home. This is where an appraiser comes in.
The value of an appraiser
An appraiser can tell you if the cost of the home renovation is a good investment by providing an appraisal of what the home will be worth after improvements are completed. With this information you will be able to make better informed decisions.
Different types of home renovation projects add different amounts of value. Cost does not always equal value, so just because you spend $50,000 does not mean your home’s value will increase by the same amount. Some projects may help the value increase by more than the amount spent or less.
Home renovation options
Depending on the outcome of the appraisal you will have several options to choose from:
Value of home renovations is greater than the cost- This is the best case scenario because you are getting more value out of the renovations than the cost to complete. You should pat yourself on the back because the home renovation options you chose are the same ones that that majority of buyers in your market find appealing.
Value of home renovations is similar to the cost- While this option is obviously not as good as the first one, at least you’re not losing money on your investment, right? You’ll need to weigh the pros and cons of continuing on with the project or modifying it in some way to get more return on your money.
One thing to consider is how much longer you will be in the house. Will these improvements help you sell quicker when you put it on the market in a couple of years?
Value of home renovations is less than the cost- Obviously this is the least attractive scenario but one that occurs a lot. One of the most popular types of home improvements falls into this category, and that project is adding an inground swimming pool.
The cost of adding a swimming pool is typically more than the resale value you get out of it when selling, so why do so many people do it? Most people do it because of the pleasure it provides their family, which is priceless. You will have to make the decision based on your own set of circumstances.
Here are some options available to you if you don’t want to proceed with the home renovation project “as is”:
Modify the project- Since appraisers are typically very familiar with the real estate market you could pick their brain to see which changes will move the needle the farthest. If you were going to install granite counters, but the majority of homes in you area have laminate counters, then that is a place to start.
Another example is one a fellow appraiser told me about. Their client wanted to add on a master suite but after finding out that the cost would be more than the value added they decided on another option. They added a bedroom to their unfinished basement and then combined two bedrooms into one for the master suite.
It turned out that the cost of adding the bedroom to the basement and combing the rooms was less than adding on a complete addition. Modifying their original plans helped the owners get more value for the money they were spending.
By enlisting the services of an appraiser during your home renovation project you’ll make smarter and better informed decisions.
Question
Are you considering a home renovation project? If so you may want to think about some of the things I’ve discussed. If you’ve utilized an appraiser during your own project, I’d be interested in hearing your story. Please leave a message and let’s keep the conversation going.
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Hey now Tom, 203k, renovation project, and pre planning are all tougher jobs than typical appraisal. I don’t want this line of thinking to get around. Ha! JK, but seriously, I do not want to get all those requests. Write something about the value of a verbal appraisal over a phone call, and mailing the appraiser a hundred dollar voluntarily gratuity check instead. That is my favorite engagement type. LOL.
Hey Tom. It’s so important to consider the value the renovation will add to the market. I think appraisers have lots of experience and advice to give in this regard. At times home owners need some direction on what to do. On one hand an owner should do whatever they want, but on the other hand owners might want to consider the resale market if selling is going to be something that happens soon.
Agree totally Ryan. We all like to think that we’ll be in our home forever but sometimes things do happen and people have to move. Knowing what improvements add the most value can help us have peace of mind that our money is well spent and will get the best return.
Great idea Tom. This is a service that I often provide to my clients. I call it Value Maximization Consulting.
Thanks Gary, awesome name!