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Top 10 Renovations That Cost More Than They Are Worth

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There are many renovations that cost more than they are worth when it comes time to put
your house on the market. Home upgrades come in many different shapes and sizes. While
everyone has their ideas of what will increase their home’s value, there are several
renovations to steer clear of.

Going Overboard

Before you consider remodeling anything in your home, get a general idea of what other
houses in your neighborhood are doing. This will have an impact on your appraisal value. Be
cautious of going overboard with renovations, as this may prove to be a waste of time and
money in the end. (An appraiser calls this “over-improvement” for the market.)

Designs and Fixtures

Prior to implementing new designs and fixtures in your home, ensure these things will flow
well for the buyer that will be walking through. Do the new designs and fixtures make sense
to the rest of the home’s style?

Landscaping

When an appraiser is performing a market analysis, he or she must be able to prove that a
typical buyer will pay more for these renovations, like upgraded landscaping. Fountains,
rock walls, and intricate landscape patterns will indeed enhance the beauty of your yard,
but these things won’t lure buyers to pay extra for them. Buyers may see maintenance,
watering and weeding in what you see as beauty.

SheetrockPaint brush against a wall

A renovation that certainly costs more than it is worth is hanging new sheetrock. This is not
necessary. Consider a cheaper alternative by patching your current sheetrock and putting a fresh coat of paint on it.

High-End Upgrades

A lot of times, high-end upgrades are personal preference items. These include things such
as:

  • Swimming pool
  • Sauna
  • Steam shower
  • Heated floors
  • Sound systems

Keep in mind what a typical buyer will be looking for and expecting in your market. These
items take a large chunk from your budget and do not contribute enough value to your
home’s resale price. Steer clear of this renovation that costs more than it is worth.

New Flooring

Although you should ensure your floors are in good shape and do not show any signs of
damage, totally replacing them is a renovation that could cost more than it is worth.
Consider having your carpets or hardwood floors professionally cleaned. This process will be
much more worth your time.Person laying hardwood at home

New Front Door

A renovation that certainly costs more than it is worth is replacing the front door. Curb
appeal is a factor in the appraisal value, however there are much more cost effective
methods to improving this area. Simply clean up the front area of your home. Pressure wash
the area or simply add a new coat of paint.

Upgrading Electrical Systems

Upgrading your electrical systems is another renovation that certainly costs more than it is
worth. If you do not have a current problem with your electrical system, do not touch it.

Kitchen and Bathroom Renovations

While the kitchen and bathroom are the two rooms in which home renovations have the
most impact, it is important to not go overboard. You can freshen up your space without
replacing everything. Incorporate a new paint color, change out your fixtures, faucets, and
lighting. These minor upgrades will give your rooms a completely different look without
gutting everything and starting fresh.

Floor Plan Alterations

When considering home renovations, steer clear of making floor plan alterations. It is never
wise to take rooms away. Often times, a homeowner will take two smaller bedrooms and make one larger bedroom. However, this often results in an odd floor plan, which is not
appealing to buyers.

Definitive Valuations is here to help you determine what a renovation project will actually
add in value to your house before you get started. Contact us today!

Definitive Valuations is North Alabama’s premiere appraisal firm. Our mission is to provide
superior valuation and consulting services in Huntsville, Alabama, and surrounding areas.
Our staff strives to understand your needs and to provide the best solution for your
situation – whether for financial planning, relocation, tax dispute, legal matters, pre-listing,
or any other purposes. Discover more here.

3 Common Approaches to Appraisal Value

Three Approaches to Appraisal Value

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There are three common methods of determining appraisal value. Home appraisals
incorporate established techniques and methods to arrive at consistent and reliable
valuations. Appraising relies on these three approaches to determining value for any given
piece of property: sales comparison approach, income approach, and the cost approach.
These methods vary based on the type of property you are purchasing.

Sales Comparison Approach

The sales comparison appraisal approach is used for standard, single-family homes, and is
the most commonly relied up and sought after in the residential lending industry. This
approach looks at the sales of other similar properties. They are compared/contrasted, and
based on their similarities and differences, an appropriate value is derived. This method
ensures a fair value is determined for the home within the market and aids banks in their
lending decisions by providing them with an unbiased opinion of fair market value for the
collateral backing a given mortgage loan. This approach is also often used by realtors and
homeowners in determining list price for a property going up for sale. Overview of neighborhood

Income Approach

The income approach is implemented primarily to evaluate properties that have income
potential, such as rental apartment buildings, office buildings, or shopping centers, but is
also used in residential real estate when a property is going to be tenant occupied. The
theory behind this method of appraisal value is that a property’s value is a function of it’s
potential to bring income. Properties can command a specific amount in rent and will also
have certain expenses which will need to be taken into consideration.

A residential real estate appraiser will often use the Gross Rent Multiplier or GRM for
estimating value. GRM uses the gross rentals of a property. This calculation can be done in
one of two ways using either gross potential income or gross operating income. The value
estimate is better using the gross operating income because losses for occupancy and non-
payment are taken into consideration.

Cost Approach

The cost approach is the easiest but least used method of appraisal value. This method is
typically used for commercial property that will not be used as an income property, or larger
properties that have to be built from the ground up or drastically remodeled.

The land and property are assessed separately in the cost appraisal approach, in order to get
an understanding of what the overall value would be. The depreciation that could take place
over time is then taken into consideration and subtracted from the value amount. Lastly,
similar existing buildings will also be assessed to ensure the value is on par in comparison to
other properties.

For residential real estate appraisals, one, two, or all three approaches to value may be
employed and your appraiser should reconcile the methods employed before determining
their final value opinion.Keys with home keychain

There are many reasons to receive an appraisal from Definitive Valuations to include:

  • Determining list price for the sale of your home
  • Getting an unbiased opinion to confirm value for a cash sale
  • Reduce property tax obligations when a property is valued too high by your taxing authority
  • Valuation needed to deal with an estate
  • Determine honest property value for other financial or litigation needs

No matter the reason, Definitive Valuations is here to help. Contact us today!

 

Definitive Valuations is North Alabama’s premiere appraisal firm. Our mission is to provide
superior valuation and consulting services in Huntsville, Alabama, and surrounding areas.
Our staff strives to understand your needs and to provide the best solution for your
situation – whether for financial planning, relocation, tax dispute, legal matters, pre-listing,
or any other purposes. Discover more here.

The Importance of Previous Purchases to Appraisers

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How much weight do appraisers put toward previous purchases when completing a home
appraisal? Often times, looking at the past can help us understand the present. It’s
important to consider the factors that impact a previous purchase in the ever-changing
market of real estate.

An appraiser is required to analyze and report the past 36 months of transfers of the subject
property. Analysis of a prior sale can be normal and even mandatory in the appraisal
process.

If a property sold at a reasonable price, an appraiser could give strong weight to that sale. In
this scenario, an appraiser will take a closer look at exactly how the market and property
have changed since the sale.

On the other hand, a previous purchase could be considered meaningless if a property sold
for too little or too much in the past. In this case, an appraiser will not give real value weight
to this type of purchase.Outside of two-story home

When the Previous Purchase Means Less

Trustees Sale

This type of sale tends to go for a discount. Properties are typically not in great condition in
this scenario.

Fixer-Upper

If a home was in need of significant work, it most likely sold at a lower price. Chances are,
the home received major upgrades since the previous purchase. In this case, the previous
purchase value means less.

Family Discount

If a home was sold between family members, it is likely the previous purchase price will not
be a reliable source of information for today’s market. These types of sales often include a
discount to the actual value.Living room and kitchen of home

Factors to Consider

Timing

Before giving weight to a previous sale, an appraiser will assess whether it was a reasonable
representation of value at the time.

Context

Often times, a previous purchase is an incredible way to understand how a property fits into
the market. If a subject property has competed at approximately the same price position
within the previous three sales, an appraiser will likely give strong weight to those previous
sales. This helps one understand value for that particular property.

Adjustments

A prior sale can help determine how much the value should adjust for certain features of
the property. Is the home located on a busy street? A previous sale gives insight into
whether this was a big deal or not compared to surrounding neighborhood sales. This
research is effective insight into seeing what buyers have been previously willing to pay for.

Current Market

An appraiser will be objective by giving the most weight to the current market. You should
not get stuck on the previous purchase price and forget about the current market. Values
could have increased or softened since that previous purchase. The market could be
different today due to things such as:

  • Change in zoning
  • Change in buyer demand
  • Gentrification

No matter the previous purchase price, it is important to compare that to today’s market.

Previous purchases help appraisers to uncover how any recent improvements or changes
impact the overall value of the property. However, no matter the history of the property,
it’s important to consider all factors that impact the overall value in the ever-changing
market of real estate.

 

Definitive Valuations is North Alabama’s premiere appraisal firm. Our mission is to provide
superior valuation and consulting services in Huntsville, Alabama, and surrounding areas.
Our staff strives to understand your needs and to provide the best solution for your
situation – whether for financial planning, relocation, tax dispute, legal matters, pre-listing,
or any other purposes. Discover more here.

Inside Out or Outside In? The Best Methods for Appraisal Inspections

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When it comes to the best method for appraisal inspections, it actually comes down to
personal preference. An appraiser will determine the process that works best for them –
whether that is working from the inside out, or the outside in.

While there is no set rule when it comes to the best method for appraisal inspections, the
popular choice is going from the outside in, meaning an appraiser will measure the outside
of the property first, and then move inside. Let’s look at the least popular method first.

The Inside-Out Method

One key benefit to the inside-out method of home appraisals is that the appraiser only has
to knock on the front door once. Additionally, the appraiser can interview the homeowner
first so they can look for items on the outside of the home that was mentioned when they
get outside, such as sprinkler systems, a well, septic systems, and more.

Those appraisers who work in crazier weather tend to favor this approach because they can
avoid bringing dirt into the home. Once the interior part of the appraisal is done, the outside
work can be taken care of next. living room of a home

The Outside-In Method

The best part of the Outside-In method is that the appraiser can start with a wide footprint
of the property beforehand. An appraiser can determine the amenities on the outside,
survey the exterior, then ask questions about his or her findings when they move to the
interior of the home. Additionally, an appraiser can double check measurements from the
inside.

The downside to implementing this method in your appraising techniques is that it is more
time-consuming and requires the homeowner to come to the door twice. However, this
approach is most popular with appraisers because it can be more difficult to complete the
sketch without the footprint first.

 

Definitive Valuations is North Alabama’s premiere appraisal firm. Our mission is to provide
superior valuation and consulting services in Huntsville, Alabama, and surrounding areas.
Our staff strives to understand your needs and to provide the best solution for your
situation – whether for financial planning, relocation, tax dispute, legal matters, pre-listing,
or any other purposes. Discover more here.