7 years. That’s the average amount of time a family will live in any one house, says appraiser Dave Mailman.
In that time, what the market value of your house is when you actually go to sell can be vastly different from when you first moved in.
“As an appraiser, I would say that knowing what your asset is worth is knowledge, and knowledge helps you make decisions. But houses aren’t really investments, no matter what people think. Investments generate income, a house is just going to cost you. So in the time that you’re in your house, you want to enjoy your surroundings, you don’t need to concern yourself with what the market is going to be like (when you sell).”
“What you might think might bring a high rate of return on what you spend to upgrade your home might bring in much less than you’d expect. For example, I’ve seen reports that say that new windows translate almost dollar for dollar in value, but a new kitchen may not. You can easily put $50,000, or $100,000 into a new kitchen, especially in high-value properties, but you won’t make that up in resale. People who are buying million-dollar houses are going to want to redo the kitchen to their own taste anyway — they’re not necessarily going to like a redone kitchen and agree with your taste.”
Realistically though, nothing that you’re going to put into your house as an upgrade will give you back your value, dollar per dollar. You can’t quantify what a person might pay just because you put new siding on your house. “You’ll never have a buyer say ‘You know, I’d have paid $600,000 for this house, but since they put new siding on, I’ll pay $640,000,’” Mailman spells out. You can’t make it into a line item of value for each part of a house, it’s really the overall value that matters.”
Having your house appraised as you go to sell will help you understand what the banks will think and how a potential buyer’s willingness to pay meshes with what the banks are willing to lend. “Do you want to tie up your negotiations with someone who can’t possibly get financing for what the house is actually worth?,” Mailman asks. “You might miss your market opportunity as the buyer struggles to get the deal you’re willing to make.”
Another reason to have your own appraisal done, as a seller, is to use an appraiser with substantial local experience in the market. Many banks will go with the lowest-priced appraiser who may not have that local knowledge, so their assessment of the property may be skewed.
Appraisals provide data about market value. But homes aren’t sold because of data. They’re sold for emotional reasons. Just as you can’t quantify each upgrade, you can’t quantify emotions, either. They’ll justify the “good bones.”
The knowledge that comes with an appraisal helps to make good financial decisions. But for the most part, people will buy a home for a simple reason: “because I like it.”
Dave Mailman is a NJ State Certified General Real Estate Appraiser based in Wayne. He can be reached at 201-519-4888 for a consultation.
Appraisals provide market value data. But homes aren't sold because of data. It's the 'good bones', 'open space', or something that they can't always put their finger on. Houses sell because of emotion, not because of data.
