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Quality of Construction
When the appraiser comes to your home, they look outside for construction materials used. Is it a brick home, vinyl, siding, hardi-plank, etc. When they come inside they look at the ceilings, the walls and the floor coverings.
If you have put a lot of upgrades into your home, the best thing you can do is provide a list of these improvements along with the cost, to the appraiser as soon as they start inspecting the inside of your home. Many times there are things that are not readily visible to the appraiser or the appraiser will not give you the appropriate credit for your improvements. So this is perhaps the BEST thing you can do to make sure you get the best possible value out of your appraisal!
The appraiser will then start their interior inspection. They will look to see if you have smooth finished ceilings, which are superior in quality versus a popcorn or textured ceiling, are there tray, cathedral and /or vaulted ceilings, as they are more labor intensive and most appealing in the market. They look to see what you have on the walls or the type of paint used. Is it custom faux paint, have the walls been texturized, etc. Is the color acceptable? You may have spent thousands on paint outside and inside, but color is also important. If it is not a color that is widely accepted in the market, you could get a “hit” on value. The reason for this is that most people who would buy the home will have to repaint it to make it acceptable for them. Some bold colors work well in certain rooms of the house, but keep it tasteful. If in doubt check with an interior designer on good colors or go look at the model homes of several new developments in your area. You can get really great ideas on acceptable colors and decorating tips this way.
Here is an example of a home that had a large rec room with a bold dark color. However the room carried it off well. It has white trim and crown molding and the color is considered “popular”. This color might not work in a smaller room, where it would have a tendency to make the room appear smaller.
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Look closely at the photos below.
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The bottom photo is the end result after renovation. New tile, custom cabinets, granite countertops, new lighting, stainless appliances, etc. Total cost for this project was approximately $18,000. Return on investment was 100% as it was completed on a lake home in the $400,000 price range. This type of renovation would be “carried” in the market. This type of renovation in a $100,000 home would not see this type of return as this would not be the typical renovation in this price range. It is usually beneficial to renovate kitchens and baths, but return will be based upon values in the area and what the market will carry for the type of renovations made. Use common sense here and you will be fine!
Other items under quality of construction are lighting and floor coverings. Do you have hardwood floors, tile, marble or vinyl? Is the carpet plush, berber, sculptured or shag. Do you have upgraded fixtures? As far as the bathrooms are concerned, do you have tile in the baths, a jetted or garden tub, double vanities, etc. The more upgrades overall, the better the quality and the higher the value. The kitchen and baths still rule. Do you have upgraded appliances, granite or corian counters as opposed to laminate counters. Do you have custom cabinets...all of these items add to overall impression of value. BUT before you go out and change your home, make sure that these upgrades will be supported in the market and in your neighborhood. In other words...NEVER over improve your home for your neighborhood.
If you have the largest and most improved home in your neighborhood, this will hurt you as the other homes that have sold in your neighborhood will likely be the sales that the appraiser will choose to compare to yours and they will bring your value down, rather than up.
If you have a home valued at $100,000 prior to improvements and the neighborhood has homes valued from $75,000 to $150,000, you do not want to add $50,000 to your home to get it to appraise for $150,000 as you will not realize a dollar for dollar value on your improvements, especially in this price range. As a general rule of thumb, you get about 50-60% return on your investments up front.
There is typically a higher return for Kitchens, Baths and Landscape costs, as long as they are not excessive or unusual. As more time goes by and home values continue upward (assuming you are in a market with gradually increasing values) you will realize a higher rate of return on your renovation/investments. Unfortunately, I cannot give you a list of improvements and exactly what the return on investment will be as there are so many other variables that come into play that it is impossible to do this. However, I will give you as much specific information as possible so that you will understand what things will have the largest impact on value. What you can SEE, many times has the greatest impact as opposed to underlying improvements that are not readily visible to a potential buyer. Such as new roof shingles as compared to a sophisticated heating and air system or specialized windows or foundation system, that most potential buyers do not appreciate, unless you are dealing with an upper end quality home.