Do appraisals take into account home renovations? To what extent?

Austin FernaldAppraiser Answers0 Comments

Appraiser Answers - Home Renovation Value

There are always pros and cons with any home renovation. The biggest pro is that your home always looks way better, and the biggest con is that it always costs too much money.

Bricks Home RemodelRenovation pros and cons also apply when it comes to home appraisals.

Renovations give your home the added value, but never as much as you spent on the renovations in the first place.

The question is then, are they actually worth it?

We will touch on that in a second. But first, let's talk about the problems with them and the ones that contribute the most and least value.

But first, I want to note that this is all written from the perspective of an appraiser. Homes sell higher than the appraised values all the time for many reasons. I wrote this article without the bias of outside factors that influence home values.

If you’re getting an appraisal and need to know what you should to prepare, get our free home appraisal checklist.

The problem with renovations and appraisals

A common problem with renovations is that people are spending money on the wrong things. They spend money on things that are not always practical when it comes to added home value.

Backlit onyx and Carrara marble might be appealing to you, but do they add more value in an appraisal?

Not so much.

The majority of the time, renovations like these are for the owner of the home, and not for the added value. Think of how many buyers would actually appreciate these kinds of finishes?

I'm assuming not very many.

Another common problem is that a lot of times the updates are required for safety or convenience.

These kinds of updates, like plumbing and electrical, might cost a lot, but don't add much value.

So what kind of renovations should you do then?

Keep reading.

Renovations that contribute the most value

PaintingAt this point, you're probably thinking, why even bother with renovations at all?

Well, I can tell you for sure that there are some that add the value you hope to get.

Most of these renovations are much needed cosmetic updates to outdated homes.

Many of them you can even do yourself, without the help of contractors. However, if you do try and do these yourself, make sure you know what you are doing.

These renovations include things like:

Renovations that contribute the least value

On the flip side, there are many renovations that don't make financial sense. These are typically renovations done from emotions and not practicality.

The ones that contribute the least value are usually completely unnecessary.

The added value (Or lack of) reflects that.

The worst of these (Unless you live in Beverly Hills), are high-end fixtures and finishes.

I have seen people pour half a million into high-end finishes for their home, only to get half of the cost back or less.

Here are some other renovations that don't make financial sense:

  • Installing a pool
  • Converting a bedroom to some other use (No, you don't need a wine cellar, and neither does the new owner)
  • Putting carpet over the hardwood
  • Converting the garage into a “studio” or “man cave”
  • Closet renovation
  • Bathroom/bedroom addition
  • Plumbing and electrical
  • Insulation
  • Extensive landscaping
  • Outdoor kitchen
  • Crown moldings
  • Things appraisers can't see
  • Overbuilding for the neighborhood
  • Fountains, ponds, gazebos, playgrounds
  • RV garages
  • High-end fixtures and finishes (I can't stress this enough)

So are they worth it?

Yes and no.

Now that you have read the lists above, it's up to you to make the call. Renovations can work in your favor, and sometimes they won't.

Some general rules of thumb:

Contribute the most value:

Most of the time, if you are updating old features of your home, you should be safe. Just keep the spending reasonable and deliberate.

Contribute the least value:

If you are renovating out of personal preference for luxury or fun, then you might find yourself in the hole.


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Austin Fernald

Founder, Principal at REALVALS
Austin Fernald writes about the Southern California real estate market, as well as the real estate appraisal industry as a whole.

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