The cost of a home, it’s what doesn’t meet the eye.
Flipping property seems to be the new TV hit in home shows. I was eager to talk to an appraiser to get some information about where the shift in value is from Home A to Home B at a recent professional event. I had a vague understanding of what appraisers do because of the real estate transactions I have had, but there were two words that I heard in my discussion with an appraiser that were very informative… and disappointing. The words were: appears and appeal.
I know that not all expense on remodeling can be fully appreciated (dollar-wise) upon completion. I also know that if an unscrupulous developer wants to slap up a Band-Aid, that an unsuspecting buyer may only see “granite counters”. My frustration is that the words “appears” and “appeal” are inherent in what’s wrong with the way our society and economy view a home’s value. If the best and worst case scenarios require a lifetime of maintenance costs, on similar size homes, that could range from $50k to $300k. Shouldn’t we know that in the value of the property? If a kitchen that will get five years of use before needing to be replaced has the same “appraisal” value as one that will provide 20 years of good service, shouldn’t the home change in value (plus the cost of interest over time)?
With automobiles, this is easier to get our arms around. We learn early on that some brands have better service history; maintenance costs are readily available, and luxury is easier to see when we compare it by brand. With real estate, there is the value of the location, lot size and living space… but the minute the cost or quality of goods added inside, compounded by the quality of installation or building science get introduced, a consumer is much less prepared.
Without throwing the entire appraisal community under the bus, it is evident that a home that has an older kitchen with a quick make-over that gives it more appeal can have a value similar to a newer, better constructed kitchen that has less appeal… if they both “appear” to be recently done! One of my personal pet peeves is the quality of goods on new homes. I have seen some large and expensive new homes with sub-par wood siding – then slap a coat of solid stain on it and see failing siding in less than a decade. Yes, you can buy red cedar clapboards from $.70 to over $2 per lineal foot, and the appraisal will “appear” new, with workmanship-like install, and “appeal” to people because they’re unaware of the difference between finger jointed clapboards and CVG clapboards. I have one client who actually had to re-side their expensive and newly constructed home when it was only 6 years old… shouldn’t that change the value?
The moral of the story, I guess, is to look beyond the appeal before diving in – and think about the reputation and history of the builder as one of the value propositions, before you end up with remodeling projects you didn’t anticipate.