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Does an Appraiser Consider Quality in Valuing a Home?
September 12th, 2018 7:36 AM

Yes, quality 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 closely.

Buyers are 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.

Log style 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.