Sometimes home improvements are made simply to accommodate your own tastes, wants or needs, but it’s always good to have an idea of how various changes may affect your home’s value. In fact, understanding the correlation between an improvement and home value may even help you decide if a change you’re considering is worth making.
As a longtime mortgage banker, I’ve come to know a lot about valuing homes. Still, experience also tells me that, since I’m not directly involved in valuing them, it’s smart to lean on the advice of Realtors and appraisers.
“It is the appraisers job to be completely unbiased and report the current market value,” says D. Scott Murphy, SRA, a real estate appraiser and consultant with D.S. Murphy & Associates, who also is Chair of the Georgia Real Estate Appraisers Board. “It is not his job to protect the buyer or the mortgage company. If he does his job correctly all parties should be satisfied.”
Murphy says an appraiser puts themselves into the shoes of a typical buyer. “A smart homeowner will stay on top of maintenance items (HVAC, plumbing, wiring, roof, and so on) and be doing regular updates and repairs. Buyers don’t get super excited about maintenance items. Still, when you buy a house you expect it to have all these things in good working order.”
As common sense and real estate television shows might have led you to expect, kitchens and baths are the flashiest areas for many homebuyers. “They also are the areas which can really show a home’s age,” Murphy says. “We spend most of our time in these rooms. The value of a new bath in one location may vary significantly from another location, as would the value of that bathroom in a $100,000 or $1,000,000 home.
Veteran Realtor Betsy Akers of Atlanta Fine Homes Sotheby’s International Realty, concurs, saying, “the improvements that tend to drive value the most are often things like new kitchens and master baths. Buyers are more impressed and will pay more for something that they can see, rather than the new HVAC system or roof, though you don’t want to neglect the basics.”
Akers also notes that certain improvements may help sell a home, but not necessarily add value, such as a fresh coat of paint or inviting landscaping. “By all means contact your Realtor before you make any major improvements,” Akers says. “What a homeowner thinks is most important may not be important at all to the typical homebuyer, and an experienced, local Realtor has their finger on the pulse of what homeowners are looking for, and what they will and won’t pay more for.”
Appraiser Murphy echoes some of those thoughts. “I used to have a list of the least/most value improvements and landscaping was on both lists. Freshen up your landscaping to draw buyers in and give good curb appeal, but don’t over-spend because you will not get the money back when you sell. Spend the money and present the house in its best possible light. In general, you will get more money and the home will sell faster,” he says.
Murphy also says “geographical competence” is paramount for appraisals. “We have to be very aware of location and local trends,” he says. “It’s crucial to be familiar with the area you’re working in, knowing the schools and what buyers are really looking for.”
Murphy adds that buyers don’t really buy based on price per square foot. “And price per square foot above-grade living area; so, for instance, a finished basement would not be counted. Further, all the other amenities such as pools, porches, outdoor living spaces, plus varying lot sizes, can skew the price per square foot,” he says, noting that appraisers use what is called gross living area.
Of course, there are some common-sense things to consider when planning improvements. A good example is not bastardizing the style of a home. For instance, if the home is Mid-Century Modern, you’ll want to lean into that aesthetic.
Likewise, be slow to remove aspects of a home that might leave it lacking in the future. An example would be eliminating a bedroom or bathroom. Too, if there’s an expectation that homes in your area have certain features, you don’t want to be the one that’s lacking. So, in a neighborhood in which homes all tend to have three- or four-car garages, you wouldn’t want to eliminate two bays of your four-car garage.
Similarly, understand trends in your area. You can do this by doing a bit of online research, but, again, a trusted Realtor can quickly synthesize all of that for you. For example, I recently saw a statistic that homes with open floor plans are now appreciating faster than ones with more segmented spaces, but it would be imperative to know if that applies to the style home you have, the area in which you live and so on.
As real estate pro Akers says of the intown Atlanta markets in which she works, “many buyers are moving in from out of town, and a home that is updated and move-in ready takes top priority.”
You likely already have a trusted cadre of home-related professionals, from a mortgage person to a Realtor and perhaps others. If not, establish those relationships even if you don’t expect to be buying or selling soon. Experienced pros can make sure you know the potential ROI before you undertake home improvements.