Get Your Home's Maximum Value - Look Through Appraiser's Eyes

If you are selling or refinancing your home, you want the maximum value. Even in today's hot market, no one wants to settle for a lesser amount that could have gone toward a nicer home, a nicer college, or a nicer retirement.

According to Karen Mann, an appraiser based in Fremont, determining your home's value today actually began when you first looked at the property, as a buyer.

"Any time you buy a property, you have to look at the location," Mann says, and do so with a sense of what could happen in the future. "For instance, if there is a vacant lot next door, you should find out what the vacant lot is zoned for, because that could influence the value in the future. Let's say an office building goes in, and it is a quiet building, but nonetheless it's always there. That could negatively impact the value of your home. There may be lights on at night, for example," she explains. "Location is the first thing you have to think about."

While the location of your home will determine its value, the shape of the housing market may soften any blows from office buildings or other unattractive things nearby. "It depends on the economic cycle of housing," Mann notes. In a tighter market, buyers are less likely to make an issue of the location than in a softer real estate market.

Beyond location, Mann says that maintenance, and whether it is current or deferred, will have a large impact on a home's value. She recommends homeowners take care of problems as they arise. Fixing problems as they arise only prevents larger problems from developing, but it also signals to potential buyers, as well as appraisers, the home is well maintained.
"As soon as you see the drip under the sink, that's the time to handle it, instead of just sticking a bowl under it," Mann says. "When you see one or two shingles missing from your roof, fix it now."

For those planning to sell a home, a buyer's perception can be forever skewed by seemingly minor items, like missing shingles or peeling paint. "The potential buyer is going to say, 'OK, what else is wrong?'"

In fact, Mann says that perceptions - of potential buyers, buyers' agents, lenders, and appraisers - can determine the home's value. "Value is a perception. It's based on the perception of buyers and sellers," she explains.

Improvements to a home have varying values, which partly depend on the cost of the improvements and partly on the value for that particular neighborhood and community.

"In certain communities, if you don't have a swimming pool, you are not cool," Mann explains. "But in other communities, it's considered a pain, and they will fill them in with dirt." So if your home is in Danville, Livermore, or other warm-weather areas, investing in a swimming pool is more likely to reap a good return than if your home is in Fremont or Alameda.

That can make a distinct difference in whether or not a pool will add value. Mann estimates that, for an average pool, it would cost about $30,000 to install. While warmer climates might add $50,000 of value to the home, cooler cities near the Bay might only add, at most, $10,000 or $20,000, making the investment a net loss for the home seller.

Other items might be good to replace if you remain in your home, but won't add much value if you sell. "A lot of times, I'll walk in the door and people will say, 'I put in a new heater,' thinking their home will be worth more. But I usually have to tell them, 'The market doesn't show me that it will pay more for a brand new heater.' Appraisers, lenders, and realtors have to look at the overall market, not just one person's point of view."

For that reason, what the expectations are for homes in your own neighborhood can also determine the home's value, as well as whether it is worthwhile to make additions or improvements. "For example," Mann explains, "let's say I put on an addition to my home, so it is two-story, and it costs me $150,000. But if the standard in my neighborhood is a single story home, the neighborhood may not value the additional space, so you may not get the money you put into it. You have over-improved the home." That is why, she notes, it is considered worthwhile to purchase the smallest home in the nicest neighborhood, "because then, if you want to add on, the money you invest in the improvements will go a lot further," toward the home's value.
Hot tubs, a popular item for homeowners even if they aren't considering selling, can be an excellent addition if they are properly installed. "If you get the kind that you just plug in, then it's considered personal property," Mann notes. "But if you get the kind that is permanently installed, and an electrician hooks up the tub to your home, then it is considered part of the real property, and will usually increase the home's value."

Mann cautions, however, against assuming that all usable space can be considered living space. Areas such as garages, patios, and sun rooms are not counted in the total square footage when a home is listed. "They aren't legal livable space," she explains. "In fact, if the garage is used for anything else, you're actually penalized, because there is then no space for car storage," she says.

Lastly, Mann encourages those considering refinancing or obtaining an equity line to scrutinize the lending process carefully. In some instances, she says, the lender may only request that the appraiser do a drive-by appraisal, which won't necessarily value any interior improvements.

In some instances, Mann says that the lender may not rely on an appraisal at all. "For many people, if they are trying to pull the maximum value out of their home, this could be detrimental to the value of their property." What the lender will usually rely on, instead, are home values based on Census tract or ZIP Code.

"Try to get the full appraisal if your home is well maintained or has lots of improvements," she says. "On the other hand, if your home hasn't been kept up, it's going to be a good thing."