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Do garage conversions add value?

May 25, 2011 By Ryan Lundquist 7 Comments

A garage conversion is a quick way to increase the size of a house, but does it add to the overall value of a property? Here are five reasons why garage conversions tend to not help increase market value in the Sacramento area:

No permits: The conversion was done without permits (illegal).
Not typical: Garage conversions are not common in the neighborhood.
Low Quality: A partition and carpet in the garage really isn’t a very high-grade conversion, is it?
No Storage: Removing storage in a garage is not a plus in the eyes of most buyers. If there is no garage, where are you going to keep your bikes, tools, unused exercise equipment and holiday decorations? If a conversion is done properly, it may be appealing to buyers, but any increase in value may be offset by the negative of no longer having storage space.
It doesn’t feel like the rest of the house: A converted garage often does not feel like the rest of the house because it still has the feel of a garage (despite sheetrock, a heat source, floor covering, windows). A converted garage is often on a lower foundation and it still contains the water heater and washer/dryer too. If some of the living area doesn’t conform with the rest of the house because it is lower in quality, the market will likely not give that portion as much value. This means the extra 400 square feet in the converted garage is usually not regarded the same way as an addition on the back of the house. Applying this point means a 1400 square foot house with a 400 square foot converted garage is probably not seen the same way in the market as an 1800 square foot house with no conversion.

What does this mean for home owners and buyers? You may not get the most bang for your buck in the resale market when converting a garage. If your conversion is done in a professional workmanlike manner though, maybe you’ll come out mostly even (this depends heavily on the quality of conversion and acceptance of conversions in your neighborhood). Ultimately, without regard to market value, if you need more space, converting a garage is a fairly inexpensive way to make that happen. Just keep in mind your future plans to sell the property and how your particular conversion might be perceived in your real estate market (and how much it might cost in case you need to turn it back into a garage).

Any points you’d like to add? Would you convert your garage? Why or why not?

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook.

Why doesn’t the addition count as square footage?

May 23, 2011 By Ryan Lundquist 7 Comments

Additions come in all shapes and sizes, don’t they? I sure have come across some interesting ones in the Sacramento area. Here are a few common reasons why an addition is NOT considered living area.

Illegally built (no permits).
Shoddy workmanship.
No heat source.
Permits were never finaled.
Does not conform with the rest of the house (like the photo).
Does not meet zoning requirements (ie.. code allows 1 unit, but there are 2 units)
There is an obvious code issue such as 4 ft ceilings throughout.
It’s not really an addition of living area, but an enclosed patio, a glorified shed or partition in the garage…

Keep in mind that Tax Records may indicate your house has a large living area (or building area) that even includes the addition, but that does not necessarily mean the area is legitimate living space. It only means the Assessor is taxing you based on the information in their files. The definitive word on the legality of an addition should come from the local building and/or planning department.

What would you add to the list?

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The 5-foot rule for calculating square footage

May 19, 2011 By Ryan Lundquist 16 Comments

Do you know about the 5-foot rule for calculating square footage? This rule really matters. According to Fannie Mae standards for measuring the living area in a house, any portion of a wall under five feet in height cannot be included as living area. This is very relevant to understand especially for converted attics and second stories in places like East Sacramento, Midtown and Land Park where upstairs walls are often not 90 degrees like most standard tract homes.

In the image below from my friend Bill Cobb, we see two portions on the outer edge of the upstairs of a house where the ceiling height is less than five feet (see video explanation here). This extra area is best considered “building area” and not “living area” due to Fannie Mae / ANSI guidelines. The square footage is calculated based on 16′ x 40′ (640 sq ft), but if the entire second story (regardless of wall height) was used, the square footage would be measured incorrectly at 800 sq ft (20′ x 40′). That’s an error of 160 sq ft. Can you see how misunderstanding this rule might result in overpaying or falsely marketing or measuring a property?

Here are some photos of areas that would need to take the 5-foot height rule into consideration. I hope these images and the explanation above helps to explain the importance of this concept. Any thoughts or insight?

What is a McKeon property?

May 16, 2011 By Ryan Lundquist 2 Comments

If you live in the Sacramento area or various portions of California, you’ve likely come across a “McKeon” property. Maybe you didn’t know the formal name, but chances are you’ve seen one since they are sprinkled throughout the Sacramento area. McKeons are named after the McKeon Corporation, which built a great deal of attached four-unit properties in the 60s and 70s that are either condominiums or fourplexes. Take a one-minute video tour with me below to see in person what a McKeon looks like.

Where have you seen McKeon properties? If you have lived in one or sold quite a few, I’d be curious to hear your perspective on which unit you think is most preferrable?

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