5 things to remember about the value of landscaping

How much value does landscaping really add? Nothing. A minor amount. A huge total. I’ve heard it all when it comes to what people think landscaping is worth. Today let’s kick around some ideas from an appraisal standpoint. Anything to add?

landscaping in appraisals - sacramento appraisal blog

5 things to remember about the value of landscaping

1) The myth of no value: I’ve heard the sentiment from some real estate professionals that landscaping does not count toward the value. My take? Landscaping is often very important to buyers – especially when it is extensive or highly expected in certain neighborhoods.

2) Front vs back: My sense is front yard landscaping does not sway buyers like the backyard does. I’m not saying it’s not important or curb appeal doesn’t matter (it does). I’m only saying the rear yard tends to make a much more significant impact on value since people spend more time there.

3) One size doesn’t fit all: The value of landscaping will vary significantly depending on the price range and neighborhood. For instance, a few years back during the height of home flipping activity, it was common to see flippers at the lower end of the market do very basic cosmetic landscaping in the front yard while doing almost nothing with the backyard (seriously, rear yards were at times just dirt or bordering on unkempt). In contrast, higher priced homes were getting full-service attention in both the front and backyard. Why? Because the market had different expectations by price range and the investors’ sense was spending the money was worth it in some neighborhoods and not others.

4) On par after huge money spent: Sometimes owners will spend good money to redo an unkempt yard only to expect a huge price premium. The problem is post-landscaping the owner is now basically on par with other homes in the neighborhood rather than in a position to command a premium. This is not easy to swallow, but it’s important to recognize in order to avoid overpricing. 

5) Dollar for dollar: While we like to get a “dollar for dollar” return on our improvement projects (at the least), that’s not always possible in real estate. So when an owner says, “I spent $125,000 in my backyard” and otherwise similar homes are selling for $700,000, can we really expect this property to be worth $825,000? That’s probably not realistic, right? Most of all though, let’s find comps with incredible landscaping and let those properties tell the story of value. That way we are letting actual market data speak to us to set the tone for what buyers have been willing to pay for similar landscaping. Isn’t that better than shooting from the hip about what landscaping may or may not be worth?

Case-in-point for an incredible backyard: While appraising in the Natomas area of Sacramento I came across a house with an incredible backyard. I ended up NOT using it as a “comp” because this property sold about 10% higher than others because of the built-in pool, custom covered patio, built-in BBQ, outdoor fireplace, and everything else in the yard. I’m not calling all of these things landscaping of course, but at the same time let’s be realistic to think buyers may lump some of these items in the same category. Anyway, at times it’s tempting to give a token $10,000 upward value adjustment when we see a nice rear yard because that’s what a mentor taught us to do, but sometimes the market is willing to pay more like 10%. In this case otherwise similar homes seemed to come in around $450,000 and the subject sold for $495,000 (there were 7 offers). There was one other sale at $485,000 and it also had a sweet backyard. As you can see on the graph, the incredible backyard seemed to really matter.

incredible landscaping - sacramento appraisal blog

Here is what the rear yard looked like. I could live with that. You?

house with amazing rear yard - sacramento appraiser

Remember, let’s find a few examples of extensive rear landscaping (or an amazing backyard) if possible so we don’t base our perception of value on only one sale. After all, what is that one sale sold too high or too low?

The Washington Post: Two weeks ago I wrote a post about the ugly side of appraisal fees, and as a result Ken Harney of The Washington Post interviewed a handful of appraisers (including me) for a piece that went live today. Ken is a nationally syndicated columnist, so the conversation that took place here is going to be moving to a much bigger level. Thank you everyone. Here is Ken’s article.

Questions: What stands out to you most about what I mentioned above? What is #6? Did I miss something?

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Comments

  1. says

    Great post Ryan and I’m glad you’re covering this topic. Landscaping is significant. I agree that more money can be spent on the back yard with pools, covered areas, etc… and that can have the bigger impact on value from a standpoint of sales price. On the flip side, it is my observation that front yards will have the most impact on value from a standpoint of dollars spent to dollars gained in sales price. My evidence for this is spec home builders. They know where they can spend money to increase the price of homes and they usually won’t waste money long on things that do not have returns. Particularly in the lower priced new homes, builders will leave the rear yard to the buyer, maybe add a fence or minimal landscape, or negotiate in rear yard features after the contract. This is evidence that, in many areas and price ranges, buyers will likely not pay as much for rear yard features in relation to cost. If they would, then builders would add those features. I’m not disagreeing with you, just adding to the discussion. I too would have thrown out the comp with all the yard features if I had other sales without.

    • says

      Fantastic comment Gary. I love it. I think you hit the nail on the head here. I’ve observed something very similar. Builders hardly ever installed rear landscaping in my market, though when the “bubble” burst they began doing granite counters as a standard and also including more rear landscaping too. These days though it’s business as usual with the buyer getting a blank canvas.

      For me I have redone a yard before with sprinklers, sod, garden boxes, drip system, etc…. It is expensive and it is a pain. I might have passed on the most recent home I bought if it was not landscaped in the rear. But that’s just my personal experience. 🙂

  2. says

    When I began appraising, back in the Dark Ages, we were told that lenders did not like appraisers to value landscaping since it would only be a matter of not watering the plants for the landscaping to become diminished. As I mentioned, that was back in the Dark Ages (mid-1980s).

    A certain level of landscaping is expected by the market depending on neighborhoods and price points. An estate property priced above $3 million would be expected to have privacy buffers, expansive lawns, gardens, and mature trees. This would be overkill for even a $1 million property. But the higher up the price scale that you go, the more landscaping is anticipated and even demanded by the market. Not having a landscaping that reaches the estate quality landscaping level would be considered a detriment and an item in need of immediate upgrading by a typical buyer within that market segment.

    Truth is that high quality landscaping creates an emotional attachment to a property in the eyes of the buyer irregardless of cost. Putting a number on the contributory value of landscaping is very difficult but can be done when comparable sales that bracket in the subject property’s landscaping are available. What is even more difficult is estimating the cost of mature extensive landscaping in the cost approach.

    • says

      Wonderful comment Tom. Thank you. It’s interesting to hear your experience of “no value for landscaping”. I have heard that from many appraisers actually. I guess it’s like what you said though in that landscaping is “anticipated and even demanded by the market.” Thus when it’s not there, we may see a lower value, less marketability, and/or lower purchase price. I agree with you about the emotional aspect.

      One interesting observation for me about landscaping in California came during the drought. I noticed higher-end neighborhoods tended to continue to have lush green lawns and well-manicured landscaping throughout the entire drought. Granted, some installed drought-resistant plants and such, so we saw some changes there. But by in large there was quite a disparity by price range to a certain extent. My sense was lower-priced homes tended to show a little more brown while higher-end properties were as green as could be. To me that served as a reminder how different markets can be. I don’t say that to disparage any one group. It was just an observation and I think it speaks to some of the expectations of the market.

  3. says

    For the example in the photos, I’d say ~half of the premium was due to the “outdoor room” effect. People seem to really like them. Some have a monster TV which shows the current owner spends a lot of time out there, that is indeed an outdoor room.

    • says

      Thanks John. I always appreciate your take. This set-up is really nice. It’s large and has tremendous shade too. When we see these types of things it feels like HGTV to me. Buyers like that outdoor functionality and it’s like eye candy. It’s easy to discount the value of items like this, but they can very often fetch quite a premium (assuming everything is quality of course).

  4. Dave Torgersen says

    Great post Ryan. In some market segments backyard landscaping can make a significant difference in acceptance and marketability. I recently spoke with a homeowner who had demolished a detached garage to make room for a pool and other amenities in the rear yard. That also posed a problem in that there were no other properties within the neighborhood without garage space. The homeowner did not seem to think that lack of garage space would be an issue. My thoughts were different; wondering who would buy a $1M plus home without garage protection for their equally high-end vehicles?

    • says

      Thank you Dave. That’s a great example. Hopefully there is some space for a garage to be built elsewhere. I recall a property in a very established neighborhood struggling to sell because it did not have a garage. A small 1-2 car garage might not be that much to build, but the issue here was that it was not possible on this site. It was a big deal for marketability. On paper it looked like the property should have sold easily at that price, but buyers were not biting. It just goes to show a certain feature could be a big deal.

  5. says

    Interesting post, Ryan. I recently completed an assignment for an upper priced home. The owners recently spent a large chunk of money on an outdoor fireplace, terrace, fencing as well as some true landscaping like shrubs and grass. This was a challenge for me well because the owners wanted to recoup as much of the investment as they could. In the end I did not come in as high as they had hoped. This is difficult for an owner to accept and even more reason that they should do a little research up front to see what kind of an increase they might see from adding outdoor improvements. Great graph by the way Ryan.

    • says

      Thanks Tom. Great example. We all like to think we can get “dollar for dollar” very easily, but the truth is many items simply pay for themselves over time rather than in an instant. There is something to be said about the improvement adding a certain amount of market value right now, but there being more value in use over time as part of the value. We like to think it’s all about market value, but buyers don’t typically absorb all of a seller’s costs in one instant (sounds like solar panels).

  6. says

    My usual recommendation to sellers is that landscaping (especially in the front yard) really only enhances the curb appeal, and can therefore increase the desirability of the property and attract more potential buyers.

    Basically, it acts the same way staging does. It’s not like you get to keep all the furniture if you buy a staged home, but it certainly makes the home show a lot better than when it’s completely vacant.

    Therefore, you get more people interested in coming to view the property because the pictures are nicer, and the property shows better when they come to view it, so perhaps you get more offers because of it, and ultimately a higher price.

    Landscaping can bring that “Honey stop the car!!!” kind of effect to a home, but it’s not like my home is worth more because my grass is alive and green and yours is brown and dead.

    As for backyards, that’s different story… especially with the example you gave. That backyard had FEATURES (pool, fireplace, patio, etc.). Most backyards are just a patio, some dirt, and some grass, but they can come in different shapes. Front yards aren’t like that at all (except for that one home that had a pool in the front yard hahaha)

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