Welcome to Expert Advice: Residential Appraiser | Part II. If you missed Part I, you can catch up here.
We interviewed professional appraiser Bob Hanson, an Indiana Licensed Residential Appraiser, with several years of experience for this article. In it, we ask Bob some of the questions people have about the value of their home in relation to improvements and market factors.
Note: Due to the length of the interview, and in the best interest of providing you with as much of this valuable information as possible, we will be posting this Expert Advice interview in multiple parts.
Strap yourselves in, folks. This is a long article with lots of photos; but, it’s worth it because of all the valuable information it provides.
AD | Revisiting that point about flooring, you cannot have concrete floors to be considered a finished basement?
BOB | You could… but you would need those floors… for instance, they may have painted the floors, stained the floors and they look very nice. Some basements have uneven, unfinished, unpolished floors and that won’t work. You are going to have to do more work than that. Typically, people will put down some sort of laminate or carpeting, but you have to always consider with basements water issues – always. Some places work better than others. Walk-out basements will usually yield more money, more value than other types like a walk-up basement. All those come into consideration. Your entry into the basement, your stairwell – where is it? I typically find that if it is against an exterior wall, you are going to have more living space, more area to work with. From a decorating standpoint, there can be a lot of advantages to that. Is it a full basement – it a half-basement with a crawl space? Take all of that into consideration.
You do the flip side and go upstairs to the attic. What are your ceiling heights, do you have that gabled roof line. [AD | Which may affect the home’s ability to have a workable layout?] Absolutely! You have to have someone knowledgeable if you are going to renovate that area. So, every situation can vary. Sometimes, the best thing people can do is add a walk-in closet. People forget about storage which is very important. Some homes (such as older homes) have little storage. People often think of kitchens and bathrooms and what not, but sometimes it is as simple as storage. … Sometimes it takes an outsider to come in and give some ideas.
AD | Let’s say for example, you have an older home – 1950’s or before, where bedrooms may not be by today’s standards very large. Would it be advisable in certain circumstances, to combine bedroom spaces to have one larger, more habitable bedroom or is it better to have more total number of bedrooms?
BOB | I have seen it go both ways. Let’s say in a two-story home, they have 4 bedrooms but if they would take this one tiny bedroom and add it into a master bedroom and they convert that over to an en-suite bathroom for the master bedroom. They are ok because they have 3 bedrooms so, they are alright. There is a difference in the market place between a 2 bedroom home and a 3 bedroom home. Minimally, you would need a 3 bedroom home. Again, that will vary. If you’re in a neighborhood where everyone has 4 bedroom homes and the buyer is going to expect 4 bedroom homes, on the flip-side when you get rid of that 4th bedroom, tiny as it may be, that tiny bedroom may be perfect for someone to use as an office or as an infant’s bedroom. So, there are times where you can pay a price for converting it over. It depends on the layout of the home. You have to look at the flow of that home. You have to have someone who is experienced and knowledgeable to make sure that it works. Because if you don’t (and I think that everyone who has been in homes has seen this happen) that you have some cut up home that just doesn’t flow right.Sometimes it will work and sometimes it won’t. It depends on how much gross living area you have how much space you have…
AD | Are there certain homes that it tends to work better in?
BOB | I would say yes. I would say that obviously homes that have more gross living area have more room to work with… you can do more with them. And some homes, smaller bungalows, you know, couldn’t do it. In a smaller Broadripple bungalow, if you wanted to make your bedroom bigger, the only way would be to go after the other bedroom which would be a disaster. If you did that and made a 1 bedroom home, you would be obsolete in the market place. The typical buyer is going to hate that house and is going to walk away from it. So, it will vary from home to home.
AD | What are some myths that you have found that people have about how much their home improvements are worth?
BOB | The typical one is that they feel that minimally, that every dollar that they put in their home, they are going to get that back and more. That is a myth. If you spend $3,000 on kitchen appliances for example, does not mean that another home buyer is going to come in and pay that amount for that kitchen or $5,000 for your $3,000 worth of appliances. People misunderstand and they get emotionally attached to their home and they lose sight of things that improvements that you do are your personal preference and the next person that comes in may look at them and go, “I am going to have to change this out… I hate this.” So, that is something that I have seen happen and people who are out there and have seen homes know exactly what I am talking about… where someone has done renovations and you look at it and go, “Wow! If I ever moved into this home, the first thing I would do is pull out everything that these people have spent money on because I don’t like it.” So, that is one problem. Just because you spend $10,000 on that bathroom does not mean that your home has increased in value by $10,000. That is the biggest myth.
AD | And why is that? It may not be appetizing to the market or because of some other reason?
BOB | Could be the neighborhood.Could be that it is expected. Could be that it is the economy. Could be that for instance right now, homebuyers are having a difficult time securing financing and there are [in some markets] very few buyers out there. So, regardless of what you do, you will have buyers that have an advantage because there are fewer buyers out there. That means that if a homeowner in the future is going to sell their home (and everyone should at some point think about that) you can’t take it with you. That home is going to be sold by you or by your estate or your children or whatever… that home will have to be sold. So the decisions you make about your home… give some thought as to what the typical home buyer would expect. Would this be welcome? Will they go, “This is great! This is Awesome!” or would they go, “What were they thinking?”
AD | Conversely true – since it is such a stingy market, since financing is so hard to find, since buyers are so few and far between, would it not be advisable for a homeowner to improve their space the way they want. They are going to live in it. They are not going to be able to dispossess themselves of the home. Would it not be better for them to put in those high-end granite countertops if that is what they are wanting?
BOB | If they wanted, just know that in your neighborhood if you put in $4,000 worth of those countertops, it may only improve the value of your home by $2,000 or it may end up costing you money to do that. Maybe it would be better to go with an upgraded countertop but not go overboard. There are so many choices that the typical home buyer/homeowner has any idea about. Even in the last 15 or 20 years, there are so many choices. So someone needs to research it and even better yet, they should go to someone who knows the various options and knows what is going on.
AD | Materials do add some value?
BOB | Sure.
AD | So, using marble and granite and exotic hardwoods do have some value?
BOB | Sure.
AD | Is it a diminishing return?
BOB | Right – if you get what you think is that beautiful deep purple granite and install it and spend good money on it but you got it on sale and you thought you got a good deal on it, there are going to be diminishing returns on that because there are not very many people who are going to walk in and fall in love over purple granite. Yes, you may have granite countertops but you have got to think of the market place.Most people are not going to go ape-crazy over that. They are going to head for your bathroom and hurl.
AD | In the same line of thinking, do certain design styles hold value over others?
BOB | Yes – absolutely. As the market place, as the homeowners age, a ranch style, 1 story, everything on one floor, appears to hold its value better than 2 stories I would say. The value seems to be ranch style homes appeal to about everybody. Certainly, people will have their preferences. You are going to have people who are not going to want that. But that is a tried and true design. If you look at most of the designs out there since ranch homes came in vogue right after World War II, it is the most prevalent design in American construction. Basically since … 1950. That speaks for itself. The other design is your 2 story, 2 ½ bath with the ½ bath on the main level and 2 full upstairs with an en-suite master bath/master bedroom combo. That is standard. If you don’t have that in a two-story home, there is going to be some disappointment from a potential buyer.
AD | If you have a home like that in lets say in that style (2 story 2 ½ bath), lets say that your home is currently 2 story 1 ½ bath (1 full upstairs and ½ down stairs) but you have 4 or 5 bedrooms, do you think that it might support converting one of the bedrooms into an en-suite bathroom?
BOB | It could if you said 5 bedrooms, you are probably going to be able to get away with it, but again it depends on the home. If a typical homeowner wants 4 bedrooms and you only have 3, you are going to lose people and frankly, real estate is nothing but a numbers game. You want to appeal to as many people as possible. But my opinion would probably be that if you converted that 1 bedroom to a bathroom for a master bedroom, you would be better served… you would probably be okay in many markets. Again, nothing is 100%. It is going to depend, particularly with older homes. They can be a challenge when renovating. You really need to get a professional person involved to make sure that it is going to work, that it is going to flow okay.
AD | What constitutes (defines) a bedroom?
BOB | It is defined by the marketplace. Some areas, where space is such a premium, it can almost be the size of a closet, maybe a 6’ x 6’ room…if space is such a premium in that market that may be acceptable. If you are in our area, as a general rule, most appraisers are going to be looking for a certain amount of square footage… minimally 8’ x 8’ but maybe larger than that, maybe a 10’ x 10’ area. A closet it pretty standard here. If you don’t have a closet, it is not absolutely mandatory but it is definitely preferred. Some appraisers would say that just as important as a closet is a window. You know, there is now written guidelines that say a bedroom is “This” or a bedroom has to have all of these qualifications. It is more left to the market to determine if that space works and really that is the role of an appraiser is when you walk into a home, does this space function as a workable bedroom. So I am of the opinion that it doesn’t necessarily have to have a closet and there would be 20 realtors and appraisers and people in the real estate community that would definitely disagree with me but I could look at a room and say, “hey – that could still function.” You could bring in dresser drawers, an armoire, something like that can make it still work. Sure, you still would prefer it to have a closet and maybe a closet could be built in the room.
AD | Essentially, a bed and a wardrobe would serve?
BOB | It could… it very well could.
AD | Baths – How are baths defined…full bath, half bath, ¾ baths, how does that work?
BOB | The way that I look at it, when you walk into a bathroom and you are able to wash yourself and if you can minimally shower in there, I would consider it a full bathroom. I don’t break it down in to like a ¾ bath. It functions as a full bath. I keep it simple. If you just have a wash basin and toilet? Half bath. i think most appraisers are that way as well. Most probably look at it the same way.
AD | Does planning and zoning have an impact on value, really?
BOB | It certainly can but it often doesn’t.
AD | In what way can it?
BOB | Well, if you’re zoned typical residential (residential homes), zoning is not going to be an issue. If you are in a fringe area and there is some commercial construction, that can have an impact. Are you potentially “multi-zonable” (if that is a word)? Are you residential and commercial? Are you zoned business? What is the highest and best use for that property? Is it really functioning best as a residence or is it changed? Is it now a business of some type? That really all depends on its location. That is something you want to be aware of. If you are in a smaller community, in some of these outlying towns outside of Indianapolis for instance, it might not hurt to be aware of the zoning and planning commission. Where are they going? What are they planning? Where do they see their town in a few years? Be aware of it.
AD | What about clutter? Does clutter have an impact on the way the market will react when purchasing a home…when your general buyer comes in and your home is amply spacious, has a good layout, quality materials, a good location, but the inside is poorly organized, an explosion of their personal possessions… does that have an impact on the value of their home?
BOB | I think the answer is obviously, people are human. As an appraiser, I am trying to take the clutter out. I am not looking at your personal possessions. If it is not nailed down, I realize it is going to go out of the home; however, the typical home buyer is going to be looking at your artistic abilities and your decorating abilities and if part of your life style is that you have too much clutter in your life, be it too much paper work or too much furniture or whatever… yeah, there will be a negative impact on it. You will probably have potential buyers who will walk away unfortunately for the seller. That is just the way it is. That home buyer cannot help but see this. It is an obstruction that prevents them from seeing the rest of the home, seeing the layout of the home, seeing the potential of the home and all of the great finishes are overlooked. Let’s go back to granite countertops. You put those countertops in the kitchen but if you have it cluttered up, but you have groceries you’ve not put away or whatever, they may not even realize you have granite countertops. It would defeat the purpose. It would be a disaster.
AD | We’ve touched a little on this, but tell us what is your position on “dated” spaces? Where is that line exactly? How does someone tell if something is too dated or maybe on the flip side, how does someone know if something is too ultra-modern, something too cutting edge?
BOB | When you say that, it comes to me that you can have “retro” spaces that will work. The classic, 1950’s pastel ceramic tile in the bathroom that is original to that home. It’s kind of funny because you will walk in and you will see it and maybe 20 years, you would have shuddered at it but now, it fits that time period and it’s almost now chic, almost an heirloom, keeping an original part of the home intact. It works. You know, I walked into a home and a lady had kept her original appliances from the early 1960’s and they were in terrific shape and it really worked. But… in so many homes, it does not. So, if they are in good shape, great. It can work. But usually what you run into that is the downfall, is that today’s appliances are more fuel-efficient but there’s been upgrades to them and there are advantages to having modern and new and I am sorry, you’re 1966 radar range just doesn’t have it. You know, you have the look but it’s a boat anchor. So, do you go for looks or do you go for functionality… and usually the older stuff loses out on functionality and practicality and efficiency but it is a personal thing. I have walked into some of those homes and they are well done and you know people are willing to pay for it. It depends on the neighborhood. You cannot recreate that. You can try to fake it out but when you come across the real thing, as an appraiser, you know that there are people who love that. That authenticity is cannot be repeated.
AD | In a new home, what can someone do to increase the value of their home by just changing how the room looks?
BOB | A couple of things that come to mind that are not going to break the bank… put in a backsplash that is somewhat eye-catching. Countertops are terrific. Crown moulding is not expensive. Chair rails are not expensive and can set off a room. Don’t be afraid of color. Don’t be crazy but color used correctly can add value and are easy fixes to do. Re-facing kitchen cabinets are not that hard to do. Open up the space that is somewhat en-vogue whereas older homes were more typically sectioned off.
AD | To segue, for someone who has an historic home, what do you recommend?
BOB | To someone who has an historic home, I would recommend that they keep as much authenticity as you can. If it’s historic, I would not recommend someone to rip out hardwood floors, taking out pocket doors. Keep the authenticity of the home. Look at what you need to upgrade it but be as unobtrusive as you can. Be respectful of the time period. Anything you do to upgrade it, keep it in character with the time period of the home.
AD | When it comes to adding rooms onto a structure, how does someone determine if the market will support that add-on, let’s say guest quarters, mother-in-law’s quarters, apartments over the garage or basement apartments – how does someone determine if that is a good investment?
BOB | The market is going to welcome it as long as it is installed properly. You would likely, need a professional to do it. You don’t want to see someone who has taken it on as a do-it-yourself project because these sorts of things are big projects and can really affect the value of your home.
AD | So, if it is done well, it can be a boon to your home but if it is done shoddily…
BOB | Look out! You are going to run into problems. What is going to happen is if you go so sell your home and realtors can tell you this. When you go to get a home inspection and troubles begin or permits were not filed, it doesn’t meet local code and troubles ensue.If you want to start an addition or major remodeling, you would rather work with and having it professionally done because it could come back to haunt you.
AD | Are finishes in those additional spaces as important as finishes in the main portion of your home?
BOB | They can be. It depends on what you are doing to your home.
AD | For example, a Mother-in-law’s quarters with a kitchenette?
BOB | I would keep it in character with the rest of the house. If you go crazy with that and I were a typical buyer and I was looking at that mother-in-law’s quarters and maybe I want to live in that section. You don’t want it so vastly different (superior or inferior). Keep it apples to apples.
AD | Are there any sure-fire quick projects that are going to increase the value of the home that are just inexpensive but outside of the realm of painting?
BOB | Well, I hate the term, “sure-fire”…Sometimes the best thing you can do is get another set of eyes. Sometimes homeowners cannot see the forest for the trees. Sometimes you need an outsider to help you.
AD | When should someone consider consulting an appraiser when doing home improvements or remodeling? Is always agood idea? Is it always necessary?
BOB | You are going to get me in trouble with a lot of appraisers out there because the answer they’ll want me to give is that you should always consult an appraiser, of course! Appraisers are typically necessary when a home buyer needs an appraisal. That is not to say that there are some homeowners that ahead of time could use the help of an appraiser to get an idea of what that house is worth. An alternative to that could be a good realtor. It varies between both groups but overall an appraiser can help you by giving you an idea of what that house is worth by coming out and looking at the house and giving you a range of values in the neighborhood. They are not necessarily going to tell you to decorate your home. They are not going to tell you that your home finishes will increase your value by 10% if you do “this or this.”They are going to go encapsulate that on that date your home was worth that amount and the typical buyer and seller in an arm’s length transaction would yield whatever dollar amount and sometimes that is very valuable. An appraiser is not going to tell you if you update your kitchen it will increase your value by 10%.
AD | But an appraiser can project value in the future, true?
BOB | Yes. If that is requested of them, yes they can. They can do future value. Rarely, but yes they can.
AD | General advice?
BOB | Yes – when you have neighbors that are putting their homes up for sale and they have open houses… Go to them. Take a look around. You may get some ideas about what the differences and similarities are between your homes and you may get some chocolate chip cookies too. While you’re there, ask the realtors what is it listed at. If the home is listed properly, it should sell in a month, two months, three months and hopefully within 95%-97% of listing.That doesn’t mean that it will… it could be over listed. That is kind of the unspoken objective. If you see a home on the market for a lengthy period of time, something is going on. Also, the other thing is, all homes are repossessed, HUD homes, distressed homes, those are going to affect value. No doubt about it. Drive around and look around your neighborhood.
AD | Final parting words of wisdom to the standard home owner?
BOB | I think your living space…there is an emotional and a physical and a spiritual appeal to everybody. I think that it should be harmonious. Step outside of what others are going to pay for your home. There is a good chance that most people aren’t selling their homes. You have to live in that home. Don’t go crazy with the changes that you make. Think about the future when you go to sell your home but yet make that space work for you. Know your limitations. Be conscious of what you do. There are markets where if you put a mailbox out front, you have over-valued your home. So be aware. At the same time, your home is your most valuable possession, so make it work for you. Make it somewhere you can go home at night and live a happy life.
March 30, 2012 | Filed under Expert Advice, General Information and tagged with Aesthete Designs, Brownsburg Interior Design, Design, Indianapolis, Indianapolis Interior Design, Interior Decorating, Interior Decorator, Interior Design, Interior Designer.
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