There are many reasons why you may want to renovate or update your home.
Whether it’s for your own personal preference, with certain updates making your home more enjoyable for you or your family. Or perhaps you plan on selling in the future and want to attract plenty of eager buyers to property. Or you could be looking to raise your home’s appraised value, which can help you build more equity.
But if you intend on updating your home specifically to raise the appraised value, then you should be aware of a common misconception that many people have when it comes to appraisals.
- The difference between the appraiser’s perspective VS the buyer’s perspective
- Why it’s difficult to make any guarantees as to which updates will raise your property value
- What features of a home are more likely to have a bigger impact on the appraiser’s valuation
- A potential pitfall when renovating your home with the intention of raising the property value
Strategizing From An Appraiser’s Point Of View – Not The Buyer’s
If you’re hoping to increase your home’s appraised value, it’s important that you strategize from the appraiser’s perspective – NOT from a buyer’s perspective.
In other words, home updates that appeal to a buyer may not necessarily stand out to an appraiser.
For example, a lot of people believe that updating your kitchen appliances can help to raise your home’s value. But that’s not necessarily true.
While newer appliances or a renovated kitchen may raise your home’s value in the eye of the buyer, they may not necessarily raise your home’s value in the eye of an appraiser.
For the most part, appraisers are looking at the long-term characteristics of your home that are more difficult to change.
For instance, the location, neighborhood amenities, square footage, number of bedrooms/bathrooms – those features can have a bigger impact on the appraiser’s valuation, as opposed to features that are easier to change such as newer appliances or cosmetic updates like fresh paint or crown molding.
That’s not to say that investing in new appliances or cosmetic upgrades isn’t worth it. Those types of improvements can potentially make a positive difference in your home’s value, but it’s important to have realistic expectations as far as what an appraiser is looking for.
Why It’s Hard To Make Guarantees As To Which Updates Will Raise Your Property Value
The reality is that it’s hard to make any guarantees as far as which renovations will increase your home’s value in the eyes of the appraiser.
Appraisals are an educated opinion – not a science.
For that reason, it’s very difficult to tell a homeowner, “X renovation is sure to increase your home’s value by X amount” as it’s almost impossible to accurately predict exactly how a certain upgrade will affect the appraised value of your home.
Yes, in some instances updating the kitchen and adding new appliances can in fact increase your home’s value. But just because you spend $20,000 on a new kitchen doesn’t necessarily mean you’ve automatically raised your home’s value by $20,000.
Another important point to keep in mind: The appraiser will also likely be looking for major structural or systems damage that could detract from the property’s value.
A potential downfall here is if a homeowner pours their time and resources into making luxury upgrades but then neglects the general upkeep and maintenance of major systems like plumbing, electricity, HVAC, insulation, foundation, damage and pest prevention.
One could argue that damage prevention is actually more critical to the appraised value than adding fancy, new upgrades. Depending on your reasons for renovating, it may make more sense to invest time and energy into the general upkeep and maintenance of your home.
But again, because appraisals are an educated opinion – not a science, it’s hard to make any guarantees as to the specific actions you can take to raise your home’s appraised value.
Renovations & Home Appraisals: The Bottom Line
If you are planning to renovate your home with the intention of raising your home’s appraised value, keep in mind that an appraiser’s valuation of your home is NOT the same as a buyer’s valuation of your home.
You don’t necessarily need to renovate your home to increase the appraised value. If anything, simply purchasing a home, keeping it in good condition, and waiting as real estate prices increase over time, that in itself could potentially raise your home’s appraised value.
And yes, certain renovations can increase your home’s value as well. Adding a new bathroom, a deck, a fence, or a finished basement, those sorts of upgrades have been known to increase the value of a home.
But an appraisal is an educated opinion – not a science. If you’re investing a lot of money and time, you should be aware that a $20,000 renovation is not guaranteed to increase your property value by $20,000. It could, but it’s difficult to make that sort of guarantee when it comes to appraisals.