“Help! The appraiser didn’t give sufficient value to the improvements to my home.”
This is quite often a homeowner’s retort to a lower-than expected appraised value of their home. Homeowners are very proud of their home as well as the improvements made. An appraisers job (per the scope of work usually provided by the lender) is to find comparable homes to the subject. Because in reality, no two homes are identical, the appraiser will bracket items such as condition, quality, etc.
So how does this allow for an appraiser to adjust X dollars for my improvements?Â
Well an over simplification is that the appraiser’s goal is to find what the market is yielding for such an improvement. The cost of an improvement isn’t necessarily what prospective buyers are willing to pay for such improvement. Its quite rare for cost and value to be the same. Appraisers quite often utilize techniques such as matched-paired, extraction, or regression analysis to get an idea of what a certain feature would be worth in your market.
It may be better to approach this as, ‘what would a potential buyer be willing to pay for these improvements considering the availability of those improvements in my market?’
If such improvements are fairly common and expected, the value to the improvement would be different if the improvement is rare.
Its important to remember that although we take great pride in our homes, we need to remind ourselves that if we are looking for an increase in value, we have to think what potential buyers would pay in comparison to homes in your area. Albeit that this is a very general guideline, but it can certain shift our thinking away from the cost equals value notion.
