is one of the many variables considered in the appraisal of a home, along with
condition, effective age, appeal, design, etc.
Not only the quality of the home being appraised, but also the quality
or lack of in the sales comps used in the appraisal.
When a lack
of quality or a need for improvements is observed, as an appraiser, I will make
a list of deficient issues and what it will cost to repair them. This cost to cure is then utilized as an
adjustment in arriving at an “as is” current market value for the home being
appraised. In my experience buyers do
this when making a purchase. A home might technically be remodeled, but if
the work is sub-standard or obviously “do it yourself”, it may not compete with
professionally remodeled homes. When
something looks off in a house, it’s a red flag to look at other details more
sometimes influenced by flashy ornamentation.
While we may not agree with it, if buyers are paying more for these
shiny features rather than something older and so-called better, it is our job
as appraisers to recognize the market reaction and take that into consideration
in our value.
and Historic homes are also a consideration.
Buyers may pay 15% more for a log style design compared to more
conventional construction. Historic
homes like those built by Gus Maltby, in Big Bear, during the 30s and 40s have
a mountain charm that many buyers pay a premium for and appreciate.
One last point
worth mentioning has to do with quality issues that are below the surface, like
2 x 6 framing, extra insulation, plumbing and electrical updates, extended life
roofing, energy, fire and seismic upgrades beyond current building codes,
etc. In order to determine if buyers are
paying more for these upgrades, it is necessary to extensively research the
market data rather than make our own assumptions about what the market should
and shouldn’t do.
While it is
difficult to put a dollar figure on differences in quality, there typically is
a range of value of the adjusted market data.
The recognition of a high quality home being appraised is a good
justification for favoring the higher end of the value range.
In the final analysis, whether it’s
logical or not, it’s the market that gives value and the appraiser is there to
reflect the market reaction and take that into consideration in the appraisal.