• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

  • About
  • Appraisals
  • Order
  • Ask Ryan
  • Areas
  • Classes
  • Press
  • Trends
  • Share
  • Contact

Functional Obsolescence

The myth of dollar for dollar in real estate

May 2, 2018 By Ryan Lundquist 21 Comments

I’m in the middle of a bathroom remodel, so things have been hectic in my world. But beyond the noise and dirty house, how much value is this going to add? If I spend $15,000, my home will be worth $15,000 more, right? Let’s talk about it.

Dollar for dollar: It’s rare in real estate to spend a dollar and get a dollar back in value. It seems like it should be easy to increase value like it is on HGTV, but even if you look at the Remodeling 2018 Cost vs. Value Report, hardly any items on the list give close to a 100% return compared to the cost. For instance, a bathroom remodel is said to only add 68.2% of the cost to the value, and an upscale kitchen remodel is said to only recoup 46.5% of the cost in the resale market. Yikes. That’s pretty far from 100%.

Tub example: Here’s an example about cost vs value. Tubs like this can easily run $3,000 to $5,000 for just the tub alone, and based on conversations I’ve had with owners it’s not uncommon for someone to have spent $6,000 to $15,000 for a set-up like this. The tub is wonderful for someone who needs it, but in terms of value it might add very little if anything (classic functional obsolescence). In fact, many buyers might count it as a negative because it’s something they’ll likely tear out. Thanks Gail Robards for the photo.

Big point: I’m actually not a huge fan of published cost vs value lists because I wonder where the data comes from. Also, do the numbers make sense in every neighborhood and price range? Probably not. Yet I find these lists are still useful in conversations. An owner might say, “I spent $22,000 on a bathroom remodel, so my home is worth $22,000 more now.” Well, firstly let’s realize the remodeling lists don’t even give you $22,000 in value, so it’s probably a good idea to lower expectations (before the appraiser gets out there especially). Most of all, let’s look to the comps with similar features. Are they selling for $22,000 more? That’s what matters most because real estate value is about what buyers are willing to pay for something – not the cost. Thus an owner might have spent $70,000 on a remodel, but what are buyers paying for similar remodeled homes in the neighborhood? That’s the most relevant question, and one which appraisers will focus on when coming up with a value.

My bathroom remodel: Here are some progress shots for my bathroom remodel. We went with a tile floor that looks like wood, subway tile in the shower (classic look in my mind), and a white quartz counter. This bathroom only had a stand-up 1950s shower, so part of the remodel involves moving the shower to the existing tub. This left a huge space, so I’m building out shelves in the old shower. Eventually these shelves will be stained a darker brown to match everything. And this is Ollie, our rescue dog.

I hope that was interesting or helpful.

Questions: What types of conversations do you tend to have about cost vs value? Have you ever used actual cost vs value figures like this to help conversation flow? I’d love to hear your take or any stories. 

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

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Appraisal Stuff Tagged With: appraiser in Sacramento, appraisers sacramento, bathroom remodel, cost vs value, Functional Obsolescence, Home Appraiser, House Appraiser, remodeling

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?

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

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

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

How can a 40K remodel only increase value by 20K?

February 6, 2013 By Ryan Lundquist 4 Comments

Imagine you just finished up a sweet $40,000 kitchen remodel. The old cabinets from the 70s are gone, your green vinyl flooring has been replaced, and a thick granite slab and stainless steel appliances have trumped formica counters and crusty outdated appliances. You’re extremely happy, and also satisfied to have improved your property value by $40,000. That’s what you did, right? Not necessarily.

kitchen remodel - photo by Sacramento Appraisal Blog

Why do appraisers not recognize the full cost? It can feel maddening to property owners when appraisers don’t include the full cost of a remodel in an appraisal report. But there is a reason why the total cost might now show up in the final value (assuming the appraiser did a good job of course). The key issue in the mind of an appraiser is how much buyers are willing to pay for the remodel. Or in appraiser lingo, what is the reaction in the market for the kitchen remodel? Through research and comparison to other properties in the neighborhood or market, appraisers find out how much a kitchen remodel is worth. For instance, if homes with an outdated kitchen are selling at $250,000, but homes with a similar kitchen remodel are selling at $270,000, then it’s clear the market is willing to pay $20,000 for the kitchen – despite the cost at $40,000. By the way, there is no universal figure or percentage for what buyers will pay for a kitchen remodel. The $20,000 I used is only an example.

Cost vs. Value: This scenario highlights that there can be a huge difference between cost and value. Cost is what we pay for something and value is what it’s worth. As much as we’d like to think these two are the same, that’s not always the case. It’s easy to see differences between cost and value when we consider things like extra square footage, built-in swimming pools or a very expensive remodel that definitely won’t see the cost recovered in the market because the house is now overbuilt. Experienced inventors know this phenomenon well too because they have to be very cautious about their numbers. They know an $80,000 remodel doesn’t necessarily add $80,000 in value to the acquisition price – especially if the initial purchase really wasn’t that good of a deal. That’s why the goal is to buy low enough to fit in the cost of improvements and profit. Ultimately no investor wants to make the wrong type of improvements or outspend the resale value.

If you’re concerned about resale value, it might be worth it to talk with an experienced Realtor or appraiser about your plans (before you remodel).

Questions: What do you think adds the most value to a home? What type of improvements would you recommend for home owners? Any stories to share if you’ve had your property recently appraised?

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

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Appraisal Stuff, Resources Tagged With: cost vs value, Functional Obsolescence, Home Appraiser, House Appraiser, how much value will appraiser give for kitchen remodel, low appraised value, price and value, what is a kitchen remodel worth, why did appraiser not give full value

How Legos can help us understand real estate

January 15, 2013 By Ryan Lundquist 14 Comments

What could Legos possibly tell us about real estate? Scroll through the images below to digest some real estate concepts one block at a time. We’ll touch on issues such as functional obsolescence, code violations, the value of a view and FHA safety standards. What else do you see? I’d love to hear from you in the comments below.

Legos and real estate - photo by Sacramento Appraisal Blog - 1

Legos and real estate - photo by Sacramento Appraisal Blog - 2

Legos and real estate - photo by Sacramento Appraisal Blog - 3

Legos and real estate - photo by Sacramento Appraisal Blog - 4

Legos and real estate - photo by Sacramento Appraisal Blog - 5

Legos and real estate - photo by Sacramento Appraisal Blog - 6

Legos and real estate - photo by Sacramento Appraisal Blog - 7a

Legos and real estate - photo by Sacramento Appraisal Blog - 8

I used to play with Legos as a kid all the time. Did you? I still build though quite regularly with my two sons who are six and nine. They absolutely love Legos, and it really gives us a fun way to connect. We actually built this house a few days ago, and after building I thought it would be perfect for a blog post.  🙂  Two birds with one stone – family bonding and blogging.

Which photo do you like best?

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

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Appraisal Stuff, Random Stuff Tagged With: balcony access problem, FHA safety issues, Functional Obsolescence, health and safety FHA, Home Appraiser, House Appraiser, legos and real estate, legos used in real estate, Photos of Legos, Real Estate Appraiser, Sacramento appraisals, using legos to tell a story

  • Go to page 1
  • Go to page 2
  • Go to page 3
  • Go to Next Page »

Primary Sidebar

Connect with Ryan

 Facebook Twitter LinkedIn YouTube Instagram

Subscribe to Weekly Post

* indicates required

Search this site

Blog Categories

  • Appraisal Stuff (407)
  • Bankruptcy (3)
  • Divorce (4)
  • Estate Settlement (6)
  • FHA Appraisal Articles (56)
  • Internet (53)
  • Market Trends (482)
  • Photos from the Field (126)
  • Property Taxes (70)
  • Random Stuff (231)
  • Resources (566)
  • Videos (161)

Blog Archives: 2009 – 2021

Lundquist Appraisal Links

  • Appraisal Order Form
  • Appraisal Website
  • Rancho Cordova Appraiser Website
  • Sacramento Appraisal Blog Sitemap
  • Sacramento Real Estate Appraiser Facebook Page
  • Twitter: Sacramento Appraiser (@SacAppraiser)
  • YouTube: Sacramento Appraiser Channel

Most Recent Posts

  • How much have prices risen since 2012?
  • How long can this market keep going?
  • What is your housing persona?
  • Rapid price growth & the Gilmore Girls next door
  • Are first-time buyers targeting 2-4 unit properties?
  • Stale real estate headlines & buyers flocking to El Dorado County
  • My new sewer line adds huge value, right?
  • The housing market nobody predicted
  • Real estate trends to watch in 2021
  • You carried me & a spreadsheet for Christmas

Disclaimer

First off, thank you for being here. Now let's get into the fine print. The material and information contained on this website is the copyrighted property of Ryan Lundquist and Lundquist Appraisal Company. Content on this website may not be reproduced or republished without prior written permission from Ryan Lundquist.

Please see my Sharing Policy on the navigation bar if you are interested in sharing portions of any content on this blog.

The information on this website is meant entirely for educational purposes and is not intended in any way to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or any other potential real estate or non-real estate purpose. The material found on this website is meant for casual reading only and is not intended for use in a court of law or any other legal use. Ryan will not appear in court in any capacity based on any information posted here. For more detailed market analysis to be used for an appraisal report or any appraisal-related purpose or valuation consulting, please contact Ryan at 916-595-3735 for more information.

There are no affiliate links on this blog, but there are three advertisements. Please do your homework before doing business with any advertisers as advertisements are not affiliated with this blog in any way. Two ads are located on the sidebar and one is at the bottom of each post. The ads earn a minor amount of revenue and are a simple reward for providing consistent original content to readers. If you think the ads interfere with your blog experience or the integrity of the blog somehow, let me know. I'm always open to feedback. Thank you again for being here.

Copyright © 2021 Sacramento Appraisal Blog