What adds property value?

Question

Good morning, I’m looking for advice from a seasoned appraiser. I’m closing on my first investment property in the next couple weeks. What actually adds value to a home?

Kerry Baird · Answer

@Eron A. search for 10 x 10 kitchen, and your local area.  Here is a note from Ikea:

Our full kitchens are shown with a standard 10’x10’ kitchen layout price, which includes cabinets, door and drawer fronts, drawers, shelves, hinges, cover panels, toekicks and legs in a single style. Your choice of countertops, knobs and handles, sinks, faucets, lighting, appliances, and accent cabinet pieces are sold separately. Tax, delivery, assembly and installation not included.

Kerry Baird · Answer

We bought a termite ridden house, with holes in the walls, and loose wires.  I knew the land was where the value was, but what finish to include?  We aimed to increase both the quality and condition and thusly increased the appraised value of the house.  (See my "circus tent" photos and story in my blog)

This is from our appraisal. It mentions both quality and condition. Below is  an old post here on BP, which should help the OP:

We are not able to lend on a C5 or C6 rated property (no one else can either- FNMA and FHLMC require C1-C4). The items need to be repaired/replaced to bring this to a C4 or better condition before we can close on it. The appraiser noted missing storm windows, missing kitchen cabinets, missing ceiling tiles, no appliances, some tile and carpet missing, holes in the drywall, some missing siding, and some garage items- door, siding and a hole in the wall.

• C1 - New Property
• C2 - No deferred maintenance, little or no physical depreciation & recent updates
• C3 - Well Maintained, with normal wear and tear and, perhaps, some updates
• C4 - Minor deferred maintenance requiring only minimal repairs
• C5 - In need of significant repairs
• C6 - Substantial damages or significant need of major repairs

As you can see the differences between the condition of a property between a C1 and C4 is minimal between each Rating, but between C4 and C5 there is a HUGE difference.  The difference between between a C4 and C5 also plays a HUGE role in whether the property will be able to obtain financing or not.  A property with a Property Condition Rating of C5 or C6 might not be able to qualify for financing unless there are extensive repairs/improvements done to the property, or the financing is with a 203K Rehab Loan.In order to obtain financing on a property it HAS to be in livable condition.  A property with a Property Condition Rating between C1 & C4 is considered livable.  A property with a Property Condition Rating of C5 or C6 is not in livable in its present condition.

Cory Cox · Answer

@Ferris Anthony - This seems like a real broad statement.  Everything can add "value" to a home.  Appraisers will take into consideration everything from new electrical wiring, flooring, roof, etc.  But a buyer/tenant may "value" more new paint, appliances, location, etc.

If you have a more specific question of does this or that add more value then I can give my opinion but I'm not a licensed appraiser.

Good Luck

Andrew Rosenberg · Answer

In Hawaii solar panels are a big deal.  Some are owned and there's also a variety of leases.  There's a limit on % of solar paneled houses per neighborhood, so having solar panels (and owned) is a big plus.  Just a regional example.

Andrew Rosenberg · Answer

more for a house than a condo. being locked out of option to put panels on a home is a deal breaker for me as a buyer. panels for my primary residence have already broke even. did refi recently and it was part of report. sorry not familiar with current tax incentive situatio. for us back when we put panels in it was a no-brainer.

Eron A. · Answer

Can someone here link me to some retailers of kits? Im not sure if "kit" is the right term, but i want for example, a kitchen kit....and pricing. I dont want to have to price everything individually. Basically i need everything together for kitchen, and then for bath, etc.

im thinking of buying my first house and it needs to be fixed up. Its in bad condition.

Jaquetta T Ragland · Answer

@Ferris Anthony bathroom and kitchen.

Dennis Cosgrave · Answer

It all depends on the location and class of housing. For example, installing granite counter tops in a Class C property will likely not any value. Installing hardwood floors in a Class A or B property will. I agree with a previous poster; have a real estate agent look at it and determine which improvements will add the most value. The key here is to add more value than what it costs.

Lucy Hood · Answer

@Ferris Anthony every house is different. I’ve seen $20,000+ remodels give no return because of the homes size, location, structural problems, etc.

The top things you can do to see a property’s value increase is a new roof, new life system ( HVAC, plumbing, electrical, water heater)

I would have a Realtor take a look at the house and get their opinion if you’re looking to maximize your return on investment.

Stephen DeThample · Answer

@Ferris Anthony. You can give the appraiser a list of improvements that were done to the house, Include photos of before and after.

What adds property value?

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