How does an appraiser value a pool? There’s really no standard dollar figure for a pool’s worth since pools come in all shapes and sizes, but pools are very commonly worth FAR LESS than the cost of installation. In the Sacramento area it’s not uncommon to see appraisers assign a mere $10,000 or so of value for a standard gunite built-in pool.
Why do appraisers give so little value to a pool? It seems silly to think a pool installation at $30,000+ would only yield $10,000 or so in an appraisal, right? Let me explain.
1) Market Interpretation: First of all, the appraiser should not be making a subjective value judgment, but is rather interpreting what the market is saying about what a pool is worth. The appraiser analyzes similar homes with and without pools to see if there is a reaction (price difference) in the market for the pool. For example, if homes with pools in a neighborhood have sold for $290,000 and homes without pools have sold for $280,000, assuming everything else is similar, the pool is worth $10,000.
2) Buyer’s Perspective: If a buyer was looking at two identical homes, but one had a pool and one had no pool, how much extra would a typical buyer pay for the pool? If the pool cost $30,000 for installation, doesn’t it seem unrealistic that the buyer would pay that much extra for the pool? (especially if the house is only worth $150,000). The same principle could be seen with a $30,000 kitchen remodel. While the remodel is very nice, a buyer might only be willing to pay $20,000 extra for that remodel.
3) Overimprovement: Pools are a classic example of an overimprovement because they cost more than the market is willing to pay for them. By the way, for the sake of your Jeopardy knowledge, the fancy real estate word for “overimprovement” is “superadequacy”.
All things considered, keep in mind a pool may be worth more or less depending on the type of pool, quality of construction, climate, neighborhood, season and particular real estate market too. There is no constant dollar figure for appraisers to use from some sort of “Appraiser Pool Cost Manual” because each real estate market is unique and may have a different perspective on a pool. For example, a pool in an active-adult HOA community that already has three pools at the clubhouse might be worth very little or nothing to prospective buyers, while a pool in a first-time buyer neighborhood ripe with families could be worth more. Lastly, while there is a loss in value when considering market value, a pool obviously has a very subjective value in use to the owner that makes the cost worth it.
I hope this has been helpful and given you some insight into how appraisers view built-in pools. Let me know if you have any questions or insight.
Did you have a pool growing up? Do you have one now? What are the positives and negatives of pool ownership?
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The market is just like you describe in those price ranges. In the higher end, you must at least have room for a pool, and if not, some kind of compensating amenity like a view, golf course, etc. or the price penalty will be severe, often much more than the cost of the pool.
Great insight, Jeff. I’m so glad you mentioned that. It must be nice to marketing properties with a “pool-sized yard” as opposed to a tiny lot with no real appeal. I just inspected a property on the river today with a pool. Talk about amazing location and ample space for doing whatever they want. Wow!!
“Lastly, while there is a loss in value when considering market value, a pool obviously has a very subjective value in use to the owner that makes the cost worth it.”
I often ask people ‘what value do you have for this particular upgrade?’ In he end, this is what it is truly worth.
Great post Ryan!
Thanks so much, Michael. I appreciate that.
One thing I always like to ask is “are pools common in this area”, which will help let you know if they are demanded or expected, which of course contributes to their value. To help answer this question I like to look at Google aerial photos since it is so easy to do these days. By looking down on the area you can tell how many pools are in the area. If yours is the only one then that might tell you theat not many people want them, however if there area a lot of them then that will tell you that the pool has more appeal to home owners in the area.
Nice tactic, Tom. I like that. I like to look at neighborhoods from an aerial view too. You can learn a lot and see things you might not otherwise see from the street too.
We installed our pool knowing it would not add much, if any, value. The idea was to have it for our enjoyment. Yet, I can’t help but wonder if there is any value at all. Since this is a small town, there are very few comps with pools to compare, but at least I know we are not the most expensive home in the neighborhood and we didn’t overbuild. It is a luxury home, so at least anyone who buys it can afford the maintenance.
Right on Jenny. I hope you guys enjoy it. That’s exactly what a pool is for. It’s not all about resale value.