I am often asked how I arrive at the pricing of home or what are certain upgrades or improvement projects are worth on the resale market.. This is good information even if you are not planning to sell anytime soon. All price valuations are based on differential comparisons to recent sales. An appraiser or an agent should establish the value of a home based on recent sales and then adjust them for the features that one home has that the other does not. These comparable sales generally have to be within one mile of the subject property, have occurred within the last 6 months and be within 200 square feet or so of the subject property. I often hear sellers and neighbor talk about what a home sold for 2 years ago. This information is irrelevant especially in today’s volatile market. At the current time, the market is neither appreciating or depreciating to speak of so no adjustment for the time of the sale is used except it appears last summer was a much stronger market than today. So here are the adjustments that I commonly use (as do appraisers.
Square feet: The size difference between the two homes does not adjust at the price per square foot but rather at about half that. Smaller homes carry a larger price per square foot and therefore a difference of a few square foot is a much larger percentage of the overall price.
Pool vs. No Pool: I know many of you paid a great deal of money for your pool but the reality is the largest adjustment for a pool I have ever seen an appraiser use in Avondale is $14,000. It usually ranges from $8,000 to $14,000.
Lot Size: In general, approximately $1/ square foot of lot versus a comparable property. The lot premium charged by the builder has nothing to do with the value of the lot on the resale market.
On the Lake vs. Not: In Crystal Gardens this number has ranged between $15000 to $20,000 since the subdivision began..
Upgrades: A fairly broad category but if you put in that $40,000 kitchen, the reality is that it probably will only add about $10-15,000 in value. Individual upgrades such as granite counter tops, wood or tile flooring, generally add less than $5,000 in value and that assumes that the comparable home has the most basic of flooring or kitchen upgrades.
Fireplace: Most appraisers will give around $1500 for a fireplace but here in Arizona, we rarely see this as actual value in a sale.
Extra Garage Bays or Oversize Garages: An extra bay of a garage usually adjusts approximately $7500 per pay in this part of town. Oversize garages are the kind of thing that makes a home desirable but typically warrant no adjustment.