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Overimprovement

Things that don’t add much value to your home

September 27, 2017 By Ryan Lundquist 25 Comments

We’re always talking about what adds the most value to homes, but what about things that DON’T add much value? In other words, what can you do to your home that will help you get you very little return? I asked colleagues in the 100% Appraisers Group on Facebook to pitch in some thoughts about items that don’t tend to add value, and here’s what they said. Anything to add to the list? I’d love to hear your take in the comments.

First, some general principles:

1) Just because it was expensive doesn’t mean it’s valuable.

2) Buyers don’t often pay the cost of what the owner spent (except on HGTV).

3) Some features are more valuable depending on the price range and location. There isn’t one list of upgrades that can apply everywhere equally.

4) Appraisers don’t actually give value. Instead they recognize it in the market.

5) Buyers tend to focus on the total package of a house, which means they aren’t looking to pay for each specific upgrade.

PLEASE READ: Just because something is on the list below doesn’t mean it adds nothing. The issue is the contributory value is often much less than the cost of the item. So from a cost perspective we can generally say owners are probably not getting the most bang for the buck with many of these features. The problem though with any value list is that in some situations and markets any of these items could be a big deal for value (like parking spaces in a big city or a pool in the luxury market). So just read this generally as it is intended, check out the comments, and pitch in your thoughts. Please also see principles 1-5 above. This paragraph was added later on 09/27/17 to help clarify.

Improvements that don’t get much value from appraisers:

  1. Water softener.
  2. Walk-in bath tubs (like this one).
  3. Whole house vacuum system.
  4. Built-in pool (buyers rarely pay the same as the cost).
  5. Over-the-top expensive landscaping.
  6. Expensive repairs for something that is working fine in other homes.
  7. Highly-upgraded granite vs standard granite.
  8. Really thick granite compared to standard granite.
  9. Fruit trees.
  10. Expensive blinds or window coverings.
  11. Chicken coops.
  12. Extra outlets.
  13. Radiant barrier.
  14. Reverse osmosis system.
  15. Whole house humidifier. 
  16. Ceramic vs porcelain tile.
  17. Solar panels (nobody pays the full cost of a system in one instance).
  18. Leased solar panels (they’re considered personal property).
  19. Upgrades that were in style in 2002 (might not be in style now).
  20. A previously remodeled kitchen a couple of decades ago.
  21. Specialized heat and air systems.
  22. Foundation repairs (buyers expect a solid foundation already).
  23. Having too many garages for the market.
  24. Above ground hot tubs (considered personal property).
  25. Above ground pools (considered personal property).
  26. Anything that is too personalized.
  27. 4-Car vs 3-Car garage.
  28. Tandem garage.
  29. Cabinets in the garage.
  30. Epoxy flooring in the garage.
  31. Phone jacks in every room.
  32. Guesthouse (adds value, but probably costs way more).
  33. Christmas lighting package from the builder.
  34. Lot elevation premium from the builder.
  35. 6 ceiling fans vs 5 ceiling fans (so minor).
  36. 4-inch vs 5-inch baseboards (so minor).
  37. Over-the-top outdoor kitchens.
  38. Blue bathroom paint (ask Zillow about that one).
  39. Oversized parking pad.
  40. Really expensive outbuildings or custom shops.
  41. Brand new fencing (buyers won’t likely pay the full cost).
  42. Retaining wall.
  43. Designer paint.
  44. What else?

Key questions for home owners when upgrading a home:

1) Do other homes have this feature?

2) Are other homes commanding higher prices because of the feature? If so, how much higher?

3) What are investors doing in their flips to get the most bang for their buck?

Thank you again to the group of appraisers who pitched in some thoughts. Appraisers, if I used something you said, please comment below, introduce yourself, share some thoughts, and let us know what you said.

I hope this was helpful or interesting.

Questions: What else would you add to the list? Does anything on the list surprise you?

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Filed Under: Appraisal Stuff, Resources Tagged With: 100% Appraisers Group on Facebook, appraiser functional obsolescence, appraiser survey, contributory value, Functional Obsolescence, less value for upgrades, list of improvements, Overimprovement, superadequacy, things not to do to a house, upgrades

5 questions to ask yourself to be sure you’re NOT overbuilding

June 19, 2013 By Ryan Lundquist 1 Comment

How would you know if you are overbuilding or not? Here are five questions to ask and then five golden rules of real estate to keep in mind. What do you think?

Five Questions to Ask to Make Sure You’re NOT Overbuilding

1) Will buyers pay for this feature in the resale market?
overbuilding - by Sacramento Appraisal Blog2) Is what you’re doing consistent with the neighborhood or will your property stand out too much in a bad way?
3) How much value will you recover in the resale market from the cost of your project? Is it worth it to you from an economic standpoint?
4) Will people think, “wow, I would NOT want to live next door to THAT house”?
5) What do buyers really expect in your neighborhood for both size and upgrades?

Five Golden Real Estate Rules to Remember

1) Be in Touch: What are buyers really looking for in your neighborhood? There is a place for making your home comfortable and doing some things that are just for you, but try to stay in tune with the expectations of buyers also. Do buyers really want that Olympic-sized swimming pool or an underground Bat Cave guest house? (well, I would want that).
2) Principle of Conformity: There is something about blending in with the neighborhood that is desirable for buyers. Generally speaking, be a nonconformist in life, but a conformist in real estate.
3) Cost Vs Value: There is a difference between what buyers will pay for a feature and how much it costs. A $100,000 remodel in a $200,000 neighborhood does not make a home worth $300,000. Likewise, a $70,000 backyard remodel probably doesn’t make your home worth $70,000 more.
4) Ugly Ducking: Nobody wants to live next door to an ugly duckling of a house. There is something about being artistic, but be careful to not become so odd that people start passing up nearby homes because of what you did.
5) Don’t be the Largest: Larger homes tend to have a lower price per square foot, so let someone else win the “You Built the Largest House” prize in your neighborhood. Besides, there is a price ceiling in a neighborhood market where buyers will simply begin to look at similar-priced homes in a better area rather than buy the biggest house in an inferior area at the same price.

This post wouldn’t be complete without an example of an overbuilt house I saw a few years ago. See if you can spot it in the short video clip below (or here):

Any thoughts or stories to share? Comment below.

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Filed Under: Appraisal Stuff, Random Stuff Tagged With: example of overimprovement, Home Appraiser, House Appraiser, how to know if you're overbuilding, overbuilding in neighborhood, Overimprovement, principle of conformity in real estate, questions to ask before a remodel, questions to ask when remodeling, sacramento appraisers, things to do to add value

Neighborhood market trends & my wife’s 2nd book

March 18, 2013 By Ryan Lundquist Leave a Comment

We tend to get a different perspective of real estate when we look at market data in specific areas – as opposed to county or state-wide trends. Let’s glance at some local neighborhoods and property types to glean a bit of market insight.

Plastic-Polly-by-Jenny-LundquistFamily Announcement: Before diving deep into real estate though, I’d like to share some personal news. I am very proud to announce that my wife’s second book, Plastic Polly, hits the shelves tomorrow in book stores and online. She was published again by Simon & Schuster with her second middle-grade novel. Check out her website to learn more, or if you’re local I’d be honored if you would celebrate her book launch with us on this coming Saturday at Barnes & Noble in Citrus Heights from 1-3pm (click here for details).

Thanks for sharing the joy. Now on to some market trends:

All Midtown and Downtown Sales 900-1200 GLA - by Sacramento Appraisal Blog

Midtown Market: Here is a graph of all sales in Midtown/Downtown Sacramento with a living area between 900 to 1200 square feet. It’s amazing to see how the market has unfolded.

All duplex sales in Midtown and Downtown Sacramento

Downtown Duplexes: The duplex market in Midtown/Downtown has really followed the same trend as the single family market above. As you can see, property values showed an obvious decline from the peak, and have been stabilizing over the past couple of years (and flirting with an uptick lately).

All Duplex Sales in East Sacramento since 1998 - by Sacramento Appraisal Blog

East Sac Duplex Market: The same story can be told with duplexes in East Sacramento. There can be huge price differences between a standard ho-hum duplex and something really special (like the recent $900,000 sale that was an incredible two houses on one lot).

La Riviera Neighborhood Sacramento 2-story Sales - past 4 years - by Sacramento Appraisal Blog

Biggest House in the Neighborhood: When looking at all 2-story sales over the past four years in the La Riviera neighborhood of Sacramento, there are very few houses above 2000 square feet. In fact, the most common size for a 2-story unit is anywhere from 1600-1850 square feet. Here’s the thing. Since buyers tend to expect to find a 2-story house at about 1800 square feet, there tends to be a very small premium (sometimes none) for a house that is even larger in size by 400 square feet. This reminds us that price per square foot is not constant, but fluid. Know the expectations of the neighborhood and don’t build something too big that will suffer economic loss over time.

White Rock Neighborhood Sales in Rancho Cordova - by Sacramento Appraisal Blog

Post-Bubble Burst Bifurcation: A graph like this helps tell a compelling story in a neighborhood where 3 bed / 1 bath properties are most competitive to other 3/1 sales. The 3/1 sales are mostly all closer to 1000 square feet in the White Rock neighborhood of Rancho Cordova, and it’s pretty clear that most sales are under $150,000 besides one recent totally remodeled flipped property. Isn’t it interesting to see how tightly packed sales were before the “bubble” burst, yet now sales are spread apart further because of lower-end distressed sales (foreclosures and short sales) and higher-end flipped sales? This is a perfect example of bifurcation, which basically means the market is segmented into different price levels. The wild part is there are a couple flips listed around $160-170K right now. Is that reasonable or not? We’ll see. I talked with the agent of a recent sale that was one of the higher sales in the neighborhood. She said the buyer ended up offering $15,000 over list price to secure the contract. Ultimately the buyer thought the property was priced about $10,000 too low, but figured the added $5,000 would secure the deal (it worked). Is this now a good comp? Is this sale a good representation of the market?

McKeon Condo Subdivision in 95841 Zip Code - Sacramento Appraisal Blog

A Bell Curve & Condos: This graph is of a McKeon condo neighborhood in the 95841 zip code called Madison Villa Estates. It’s incredible to see the resemblance to a bell curve (or Christmas tree). The most recent highest sale in the subdivision over the past couple years is around $65,000 (renovated). There is currently a very average non-updated listing at $75,000. On one hand the market is appreciating, so we’d expect to see higher listings. Yet on the other hand, is this a reasonable price for the current neighborhood market? That’s the question appraisers are asking quite a bit. It’s important to weigh the reality of increasing values as well as the fact that some buyers are overpaying for properties.

Question: What are you seeing out there in the market right now? Any insight from the graphs or into the neighborhoods above? Feel free to share below.

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

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Filed Under: Market Trends, Resources Tagged With: appraisals Sacramento, condo sales 95841 zip code, dupelx sales East Sacramento, duplex sales Midtown Sacramento, Home Appraiser, House Appraiser, Jenny Lundquist, La Riviera Sales, McKeon condo, Midtown market trends, overbuilt for the neighborhood, Overimprovement, Plastic Polly Book, Rancho Cordova, White Rock Neighborhood

10 signs your pool is too big for the neighborhood

October 29, 2012 By Ryan Lundquist 8 Comments

This is what I’d call a super-sized pool. This house was purchased by Folsom Asset Management as one of their flip projects. For some perspective on the enormity of this swimming hole, look at my Realtor friend Whitney Johnson in the top image. Also, compare the 4400 sq ft house (single story with a 700 sq ft garage) with the pool. Have you ever seen a residential pool this big? What would you do with it if you were going to flip this house?

Overbuilt Pool. Photos by Folsom Asset Management & Compilation by Sacramento Appraisal Blog

Even if the pool was finished, it would very likely be a market liability since most buyers are not looking for a pool this big. On top of that, imagine the cost to heat the pool. It’s no wonder the investment company filled it in before selling the house.

Top-10-Image-purchased-by-Sacramento-Appraisal-Blog-from-www.123rf.comphoto_9840969_golden-top-ten-in-rank-list-trophy-isolated-on-white-background.htmlsgame-123RF-St-sm10 signs your pool is too big for the neighborhood

  1. If your backyard is a potential site for the next Olympics.
  2. If Google Maps mistakes your pool as a lake.
  3. If your pool looks like it should be at a resort.
  4. If prospective buyers think “Yikes, what were they thinking?”
  5. If aerial fire fighters use your pool to scoop up water.
  6. If the Coast Guard uses your pool for rescue training.
  7. If your pool yields little value in the resale market.
  8. If “block party” means the entire neighborhood can literally go swimming.
  9. If your buddies constantly ask you to use their jet skis in your pool.
  10. If buyers don’t have the expectation for such a large pool in the neighborhood.

Questions: What do you think of this pool? What is the 11th sign a pool is too big? I’d love to hear from you in the comments below.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

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Filed Under: Photos from the Field, Random Stuff Tagged With: before and after photo of pool, example of overimprovement, fill in pool or not, flip project, Folsom Asset Management, functional obsolesence, Funny real estate photos, House flippers, overbuilt for the neighborhood, Overimprovement, photo of residential pool, photos from flip project, pool is too big, superadequacy, Whitney Johnson

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