I swear I’m not a grammar Nazi. But today I want to bring clarity to two words we constantly kick around in real estate. What is the difference between “remodeled” and “renovated”, and why does it matter for the appraisal process?
The short answer: Renovated means something has been updated, but NOT completely changed. Maybe cabinets were painted, faucets were replaced, baseboards were added, or the interior was painted. In the example above, the kitchen only has new door handles, so it obviously doesn’t mean it’s renovated, but if it had new paint, hardware, appliances, and fixtures, we’d say it was renovated. In contrast, remodeled means something significant was replaced or walls were moved. If new kitchen cabinets were installed or the kitchen was expanded significantly, we’d say the kitchen was remodeled.
Renovated: The area of the home has been modified to meet current market expectations. These modifications are limited in terms of both scope and cost. An updated area of the home should have an improved look and feel, or functional utility. Changes that constitute updates include refurbishment and/or replacing components to meet existing market expectations. Updates do not include significant alterations to the existing structure.
Remodeled: Significant finish and/or structural changes have been made that increase utility and appeal through complete replacement and/or expansion. A removed area reflects fundamental changes that include multiple alterations. These alterations may include some or all of the following: replacement of a major component (cabinet(s), bathtub, or bathroom tile), relocation of plumbing/gas fixtures/appliances, significant structural alterations (relocating walls, and/or the addition of square footage).
Why does this matter? When something is remodeled (brand new or completely changed), buyers might be willing to pay more for it. Think of a remodeled kitchen and how buyers might spend more money in light of a resulting great room concept or a kitchen that has been expanded beyond other tiny kitchens in the neighborhood. This is where it becomes important to communicate details of the remodel to the appraiser and even what sort of feedback you got from buyers and agents. In other words, how did the market respond to the remodel? Also, if you didn’t know, appraisers actually need to indicate in the appraisal report for the subject property if a kitchen or bathroom is “remodeled” or “updated” (only for lender work). Additionally, when choosing comps it helps tremendously to know more about the details of the home so appraisers make proper comparisons and adjustments. MLS photos can help of course, but then again it’s not always obvious if the kitchen cabinets were actually replaced or if the bathtub is brand new, etc… Value is found in the details, isn’t it?
- Use the words correctly in listings and appraisals.
- Use the words correctly in conversation.
- Help appraisers understand if something really is remodeled.
- Win the real estate category on Jeopardy by using these words correctly.
NOTE: This post is not meant to rag on real estate agents in any way. That’s the furthest thing from my intention and the way I do life and business. This is simply about knowing definitions and communicating more effectively – especially with appraisers.
I hope this was helpful. If you want to go even further, check out 5 real estate words that make you sound smart.
Question: Any thoughts on stories to share? I’d love to hear your take.