Bang For The Buck

remodeled kitchen

Photo by Skitterphoto from Pixabay

Bang For The Buck

When appraising homes, I am asked all the time about hypothetical improvements to the home. For instance, “is it worth it for me to add a remodeled kitchen or should I add a bedroom?” Most of the time, I am not there in a consulting roll, so I cannot offer advice on what to do with their home to add the most value. I am there to appraise the home for a different reason. Still, I think they are all great questions. What does add the most value to a home versus the cost to do the project? There have been numerous studies and articles written on the topic. Here is one article that addresses some of the best and worst investments:

Six Best and Worst Home Improvements For Your Money

First off, it depends what market you are in and what the market expects. Adding a fifth bedroom in a market where all the homes are two bedrooms is not a good use of funds. I like to look at it from a typical buyer’s perspective. Most buyers like what they can see – kitchen, paint, baths, curb appeal, landscape, etc. There are other buyers that are focused on the mechanicals, roof, windows, electrical, and foundation at the beginning, but they are the minority. These items are typically addressed in the inspection. A new furnace is nice to have, but does it add more value than a 5 year old furnace that is functioning well and has been taken care of–NO? Most of the time, items like a furnace or a roof need to be in average or better condition and the buyer will consider them the same. They can’t see the cost down the road. It is interesting because these are the things are needs, while things like a remodeled kitchen are wants.

From appraising thousands of homes, I can say that the “wants” are the items that bring the highest ROI. Buyers love new kitchens, newbathrooms, updated flooring, clean landscape, and updated paint if they are done in a neutral style. However, they must be upgraded to the standard of the market. A completely custom kitchen with high end appliances in a 600 sf ranch home has a lower ROI than the same kitchen in a neighborhood of custom homes. In addition, the updates have to be done in an appealing manner. I have walked into homes with brand new kitchens and baths, but they are not appealing to the masses. Most buyers either won’t buy the home because of it or will want to redo the entire kitchen and baths. If you are going to do something that is not common and has a unique color pallet, make sure it can easily be changed or that you are going to enjoy it for a long time. Otherwise, it will have a very low return on investment if any return.

So, focus on the items that are highly visible in the home that will immediately attract the most viewers and buyers. We live in the internet age and if the photos are of a beautiful kitchen and baths, it is going to attract more people and most likely, a higher price. I know I take them into account when appraising homes and the prices reflect the upgrades. I almost never see photos of the brand new furnace or the new roof. They are necessary concerns, but as long as they work and have a reasonable usable life, most buyers care far less about these items.

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Is Basement Square Footage Counted During Appraisal?

basement square footage appraisal

Photo by Rene Asmussen from Pexels

Is Basement Square footage Counted During Appraisal?

As an appraiser, I am constantly asked, “is basement square footage counted” or “is part of the total square footage”. When doing a residential appraisal on a single-family home, basements are excluded from GLA or Gross Living Area in most markets. This is the total square footage that is completely above grade on all four sides. However, the basements do add value and are “counted” and adjusted for separately. You just won’t see them in the GLA. There is a separate section. There are several exceptions. Bi-level, raised ranches, and split levels have lower levels that are garden style sometimes. In order for a good comparison, the lower level is typically included in the GLA even though it may not be completely above grade on all four sides.

The major reason for separating the two is that basements and finished basements add far less value than above grade square footage. Above grade square footage has more light and typically has easier access to most parts of the house. People tend to want to spend their time above grade in these areas more than in basement. However, some basements add tremendous value depending on the quality of the finish. In many areas, walk-out basements almost feel like they should be counted in the GLA. There are elaborate wine cellars, spas, game rooms, bars, and bedroom suites.

Most of the time, a buyer is willing to pay more for an extra square foot above grade than in an extra square foot in the basement. The adjustments to each area reflect this. If basements are worth a lot in certain markets, the numbers should and will reflect that. I appraise in New York. The majority of the basements are in older homes with lower ceilings and dated finishes. These do not add near the value that a brand-new finished basement would.

So, in short, they are counted, but differently than one might think.

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Latest Appraiser News from the Appraisal Industry

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Image Courtesy of Intelligent Community


by David Lister | July 16, 2019

Valuing Timeshares Requires Special Care: The Appraisal Journal

Special care must be taken to understand the timeshare interest and the competitive market in which that interest would sell, according to an article published this week in The Appraisal Journal that explores key issues facing appraisers when valuing timeshares.

The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.

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Appraisal Institute Urges Congress to Address Valuation Issues

The president of the Appraisal Institute, the nation’s largest professional association of real estate appraisers, encouraged Congress to act on valuation topics during today’s hearing on Capitol Hill.

Stephen S. Wagner, MAI, SRA, AI-GRS, told the House Financial Services Committee’s Housing, Community Development and Insurance Subcommittee that the Appraisal Institute supports passage of H.R. 2852, which would allow licensed appraisers to perform appraisals for Federal Housing Administration loans.

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FHA Delays Rule Requiring Digital Signatures On Appraisals

The Federal Housing Administration (FHA) is delaying a rule that would require appraisals uploaded to its electronic platform to be digitally signed.

The FHA had previously announced that XML Digital Signatures will be required on all appraisals uploaded to its Electronic Appraisal Delivery (EAD) System. XML is a method of digital authentication that is secure, flexible and fairly ubiquitous; it is already in use on many digital appraisals submitted to the FHA.

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Appraisal Reform Act of 2019 Would Impact TRID

A&B Abstract:
If enacted, the recently introduced Appraisal Reform Act of 2019 would amend RESPA to require the disclosure of the appraisal management fee separate from the appraisal fee on the loan estimate (LE) and closing disclosure (CD). This could impose an additional burden on lenders and appraisal management companies (AMCs).

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Residential Real Estate Appraisal in Westchester County, NY

westchester county ny appraiser

Image Courtesy of Intelligent Community


Westchester County is one of the primary counties I appraise residential real estate. It sits just north of the Bronx, a borough of New York City, and is primarily comprised of suburban areas.

Westchester has approximately 980,000 people over 450 square miles with dozens of villages, towns, and cities. Each has its own unique vibe, home style, attractions, and school district. The school districts are a primary driver for home value in Westchester. When appraising here, finding and using comparables within the same school district is important; using homes across school districts can lead to inaccurate results.

There are a wide variety of homes in Westchester – from the small and quaint to the large estates. Appraising the entire spectrum is both fun and challenging. One of the primary challenges is lack of similar comparables. Almost every home has a custom floorplan because Westchester is not a “cookie cutter” suburbia. I am forced to pick from a wide range of homes to find what appears to be the most similar sales. From there, I make adjustments to account for their differences. In other parts of the country finding comparables is not as challenging. My brother appraises in Colorado, where many of the suburban areas have model matches. He has appraisals where every comparable is the same style and square footage. This helps narrow down what a home is really worth. However, this is not the case in Westchester which causes the range of value to be wider.

Another characteristic for potential buyers in Westchester is proximity to a train station. Many of the towns and villages have train stations that go into Manhattan and other Boroughs. This is critical for the many people who have a daily commute into Manhattan. There is the Hudson Metro North line that runs along the Hudson River, Harlem Line that runs up the middle, and the New Haven Line running on the East side of Westchester. The train lines run up through Westchester and into the counties above.

The largest cities in Westchester are Yonkers, White Plains, and New Rochelle. These cities all have their respective Downtown areas, with multi-family residential buildings and commercial interests, as well as suburban areas with single family homes. These three cities are in lower Westchester, below Interstate-287.

The Rivertowns are on the West side of Westchester along the Hudson River. The Rivertowns are: Hastings-on-Hudson, Dobbs Ferry, Irvington, Tarrytown, Sleepy Hollow, Croton-on-Hudson, Buchanan, Cortlandt, Mount Pleasant, Ossining, and Peekskill. Each has its unique feel and desirability. Each town has a train station and small commercial/restaurant areas by the river.

Upper Westchester is the area above Interstate-287. In general, the farther north you go, the larger the lot sizes. These areas are more spread out and many of the homes sit on an acre or more of land. Many homes have beautiful wooded views as the trees are dense in upper Westchester. Upper Westchester still has access to commercial interests, but it takes more time to get around.

In future blog posts I will be diving into the cities, towns and villages to discuss the primary drivers of value, types of homes, and unique factors.

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To Pool or Not to Pool

to pool or not to pool

To Pool or Not to Pool

I told my wife when we were first married, “I am never buying a house with a pool.” That pretty much sealed the deal. I was going to end up with a house with a pool and ten years later, we bought a house with a pool. We loved the house and the pool happened to come with it.

I have people ask me all the time, “Do pools add value to a home?” or “Should I put in a pool?” Answer is: “depends”, as it does many times in the appraisal world.

What type of pool is it? Is it an above ground pool or an in-ground pool? Is it heated or not heated? What area of the country do you live in and what neighborhood? I appraise in New York, so a pool is only usable 4 or 5 months out of the year unless it is indoors. From the many analyses I have done, an in-ground heated pool in New adds some value to the home. How much depends on what neighborhood you are in. The lower end neighborhoods will see little to no value for a pool as they are expensive to maintain and repair. The higher-end neighborhoods will see a much bigger value add because those owners can usually afford the constant maintenance and repairs that a pool requires. In a place like Florida or Arizona, pools are more the norm than the exception. Pools add much more value in warm climates.

Typically, above-ground pools add little to no value even if they are heated. There are, of course,  exceptions when they are well designed and blend in with the landscape, decks, etc. However, I typically see above-ground pools that are not well kept and are more of an eyesore than anything. Also, some of them could be considered personal property rather than improvements if they are not attached and can easily be moved. In-ground pools are much more appealing in New York and add more value than an above-ground pool.

So, yes, some pools do add value when it fits the neighborhood. However, the costs to maintain and repair the pool will typically be more than the added value to the home in the long run.

For me it is a love/hate relationship. I love to watch my kids and friends enjoy it, but there is constantly something to fix or update.

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What is an Appraisal?


What is an Appraisal?

An appraisal is an opinion of value from a licensed or certified appraiser. The Appraisal Institute states on their website:

An appraisal is a professional appraiser’s opinion of value. The preparation of an appraisal involves research into appropriate market areas; the assembly and analysis of information pertinent to a property; and the knowledge, experience, and professional judgment of the appraiser. Appraisals may be required for any type of property, including single-family homes, apartment buildings and condominiums, office buildings, shopping centers, industrial sites, and farms. The reasons for performing a real property appraisal are just as varied. They are usually required whenever real property is sold, mortgaged, taxed, insured, or developed. For example, appraisals are prepared for:

  • Mortgage lending purposes
  • Tax assessments and appeals of assessments
  • Negotiation between buyers and sellers
  • Government acquisition of private property for public use
  • Business mergers or dissolutions
  • Lease negotiations

The opinion of value is typically based on the sales comparison approach, which is where the appraiser analyzes sold properties that are geographically and physically similar to the property they are appraising. The appraiser can also value the property based on cost approach and income approach, but these are used much less used for single family homes.

The process makes sense because typically buyers are looking in a certain area and analyzing several homes on the market. They are seeing which home they like the best and what price they want to offer. The appraiser is essentially doing the same thing, but analyzing every aspect and adjusting for it. Most of the time the process if accurate. However, it is based on the quality of the sales data and the information available. If the information is not great, then the appraisal will be less credible.

I get asked all the time, “Is Zillow accurate”. Or “Zillow says my property is worth $XXX,XXX.” The truth is Zillow has a great product, but it many times cannot account for information that is now known. Zillow most likely doesn’t know the level of quality or upgrades on the interior. The interior is one of the major components of a home. Completely renovated homes can sell for hundreds of thousands more than unrenovated homes. Hence, why there are so many fix and flippers out there today. So, my experience has been that Zillow is a great starting point, but appraisers dig into the details more. That being said, I am sure there will come a day where technology will replace a large majority of appraisers.

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