Las Vegas Appraisal Blog

Upgrade Features: Are they worth the cost?

As a full-time appraiser, I look at bathrooms practically every day.  From older homes with “all original” décor and upgrade features to newer contemporary designed modern homes.  The styles contrast considerably and it’s easy to see how society has changed over the years simply based on bathroom designs especially when energy efficiency is considered.  My house is of the older variety, relatively speaking as in Las Vegas 1975 is considered “older”, and one of the bathrooms is original to construction.  So this week my wife and I decided it was time for some much need renovation.  What a welcome relief to view real estate wearing my homeowner hat and not my appraiser hat, or so I thought.   We began the process of hiring contractors and getting estimates for the remodel.  It was during this process when I became aware that contractors, much like appraisers, share differing opinions on what constitutes an upgrade and how the market reacts to them.  The upgrade feature, or what I had previously considered an upgrade, was centered around my old spa tub.  I must confess, since we moved into the house 2 years ago, I have only used the spa tub once.  As someone who falls on the above average scale for height and weight, it was just too small, as is every bathtub I’ve sat in since I was 12. 

The first contractor giving us a bid for the remodel asked if we wanted to replace it with a new one.  He said there are deeper ones available that could accommodate my height better.  I was intrigued, I asked if he could provide 2 estimates, with and without the spa tub.  The second contractor made no mention of the spa tub, said he would remove it and replace the tub with an oversized shower.  In his words “spa tubs have become obsolete, the larger shower is more practical, energy efficient, and the return on investment would be well worth it.”   For me as a homeowner, the expense is not justified, the difference in adding the cost of the spa vs. oversized shower was $5,000.  However, I began to ponder if I would have the same reaction as an appraiser?

Armed with my new perspective as a homeowner in the process of remodeling, I’ve been making it a point to ask homeowners with spa tubs how often they use it during my appraisal inspections.  The overwhelming response is not often.  In fact, I’ve asked many new home builders in my area if a spa tub is an option buyers can select when purchasing a new home.  Many entry level builders do not offer a spa tub as an option, the costs for the necessary electrical wiring alone is cost prohibitive.  Some higher-end builders do, but it is an option that is rarely selected, as in these markets most buyers will apply the additional cost toward a new pool with outdoor spa.  Therefore, even in a very homogenous new construction market extracting a quantitative spa tub adjustment is not possible.  In the resale market, even comparable properties vary significantly in upgrade features.  Itemizing each feature and extracting a quantitative adjustment is practically impossible due to limited data sources.  Some appraisers, will consider all theupgrade features qualitatively in their final reconciliation.  This has always been my approach unless there is quantifiable data available.  Armed with my appraiser knowledge of the market and my new “homeowner” perspective I am obligated to determine if a spa tub should even be considered qualitatively in future assignments based on specific markets. 

So now that my views have changed slightly regarding contributory value for spa tubs, I began to ponder what other features were considered “upgrades” years ago, but have since become obsolete?  Again, every market is different and I’m only sharing my thoughts on my specific market, Las Vegas, Henderson, North Las Vegas, and Boulder City.  With temperatures reaching well over a hundred degrees on a daily basis in the summer months and a winter that last all of 2 months and rarely sees temperatures below freezing, I ask the question is a fireplace really an upgrade in this market?  For the most part gas fireplaces are installed for aesthetics and not practical use.  They are far more efficient was to heat a home.  Wood burning fireplaces have been outlawed in Clark County, only homes built prior to 1990 are grandfathered in and show a legally permitted fireplace.  Fireplaces are still options offered by many new home builders, but the number of buyers that select a fireplace option is probably only around 10-15%.  Now I understand that when dealing with homes at higher altitude in Clark County fireplaces begin to take on more of a practical purpose and, in turn, may offer more contributory value, than at lower altitude.  For purposes of this piece, I am not referring to these properties or larger custom & semi-custom built homes were it may be expected to have a fireplace installed based solely on aesthetics.  I am referring to the typical home in the valley.  Is a gas fireplace, something that buyers must have and therefore, considered even a secondary driver of value? 

The reality is there is no way to know for sure; sech market and submarket is different.   However, appraisers would be well served to take off their appraiser hat from time to time and become a homeowner or buyer in their markets.  A different perspective may lead to an opportunity to, at the very least, consider changing the way they have always done things.  Which is healthy to explore from time to time since markets, tastes, decors, and designs are constantly changing. 

About the author: Dan Byrne is the senior/managing partner at Las Vegas Appraisal Co., specializing in appraisals for bankruptcy, divorce, estate settlement, and high performance/green homes.  Dan has performed informative educational offerings to both appraisers and Realtors.  To have Dan come speak at your real estate office on appraisal related topics, email [email protected]

Five Reasons : Realtors® Should Consider Getting an Appraisal

Appraisal Tips

The majority of listings may not require an appraisal, but Realtors® should consider getting one in certain cases. For example, every so often the oddball listing comes along and trying to determine a list price presents a case of “value-block,” where determining an accurate value is proving impossible. There is good news, though: we provide high-quality appraisals in a timely manner, and can offer a variety of appraisal products tailored to your, your clients’, and the property’s needs. Here’s my top five reasons real estate agents should consider a professional appraisal:

1. Seller Bias

This one is probably the most obvious. Typically, sellers are very attached to their property, and even though you’ve presented plenty of market analysis and data on competing properties, the seller still believes their property is superior to all the sales and listings in the neighborhood for one reason or another. This can lead to higher list prices, which can, in turn, have the property on the market for longer than competing properties. Properties that remain on the market for too long can become stigmatized, which can make marketing more difficult for the agents. Appraisers are the only truly neutral, non-biased party to a real estate transaction. Use that to your advantage! Allow the appraiser to provide their analysis and determine the market value for the property, taking the pressure and liability off you.

2. Cash Sale

In a cash sale, an appraisal is not required, but having an appraisal completed during the pre-listing phase of the process may help put a buyer and seller at ease, and eliminate any “surprises.”Further, a deal done without any input from a certified appraiser presents liability concerns. In a cash transaction, with the buyer and seller being represented by their respective individual or mutual agent(s), any liability falls squarely on the agents. Most cash transactions can be overseen by a qualified and ethical agent, however there are occasions when relying on a professional appraisal to determine highest and best use of a property is warranted. The cost of an appraisal, in comparison to the value of a home, is a minimal expense. While an appraisal will not absolve an agent from their ethical responsibilities, it can be a reassurance to both the buyer and seller, and mitigate any potential complaints after closing.

3. Confirm the Gross Living Area

Last month I received a phone call from an agent. He was holding an open house for one of his listings when a neighbor stopped by (looking for home décor ideas). The neighbor informed the agent that tax records showed that the listing and the neighbor’s house were model match homes, but that his home did not have the additional rooms on the second floor. The agent asked that I measure his listing to determine an accurate GLA. The difference between tax records and the actual measurements was almost 800 sq ft. Las Vegas Appraisal Co. offers home measurement services independent of an appraisal. If an appraisal with a full interior inspection is required let the appraiser know you may want to use the sketch in your marketing materials for the listing. A listing with an accurate gross living area could save your buyer or seller thousands of dollars.

4. Unique Property

This is the most common reason we get calls from listing agents: the property is unlike anything in the neighborhood, and the agent cannot determine an accurate listing price. These assignments are always complex in nature and require a specific scope-of-work to determine value accurately. In these cases, you want an experienced, qualified appraiser for the job. Not all residential appraisers are experts in specific type of properties. While I have the education and experience needed to appraise green/high-performance homes,for example, my partner is more suited than I to appraise high-end equestrian properties. Agents are best served by providing the appraiser with as much information as possible, and sometimes even meeting the appraiser during the inspection to answer any questions they may have. Due to their complex nature, be prepared to wait longer than is typical for the appraisal report when dealing with unique properties.

5. Affordability

Most agents think the cost of professional appraisal services are expensive, and that a full interior inspection is necessary for every assignment. However, there are a variety of products available to agents that won’t break the bank. Appraisal assignments can be completed without an inspection. An agent could submit photographs of a property and provide the appraiser with a detailed description of the condition, upgrade features, energy efficiency, or other items that may offer contributory value, or any features that could have a negative impact on marketability/value. These “desktop” assignments are perfect when cost and/or time is a factor. It should be noted that a desktop appraisal may not be suitable in all scenarios. It is up to the appraiser to determine if credible results can be obtained from a desktop assignment.

Not sure if you may benefit from an appraisal? Do you want more information on the variety of products we have to offer? Our professionally trained and licensed appraisers are always here to help you.For larger brokerages, we are available to come to your office and facilitate a presentation with Q&A. Please call us today at 702-894-9279.

About the author: Dan Byrne is the senior/managing partner at Las Vegas Appraisal Co.  Dan has performed informative educational offerings to both appraisers and Realtors.  To have Dan come speak at your real estate office on appraisal related topics, email [email protected]