How to make a property appraise real high ?

Question

We just purchased a REO property that needs a lot of work. The property was trashed by the previous owners and it was without any utility for the past year. Some of the spindles were just pulled from the banister and used as fire wood! I meanâ€¦all the floors need to be replaced and copper is goneâ€¦so all new plumbing, electric is a messâ€¦you kind of wonderâ€¦what did they do there? And needless to sayâ€¦walls have holes everywhere. The house has great potentialâ€¦ it catches everyoneâ€™s attention with its contemporary architecture and location is prime. There is an in-ground pool which we will soon find out if it works.  The numbers are as follow:

Asking price: $167,500
Appraised at: $167000 (2 months ago with repairs in mind)
FMV:$220,000 (sale comparison in the area and sq. ft.)
Bought it for : $128,000 (we closed on Wednesday !)

Now the work begins and we will have it re-appraised in 4 months. We need for the house to appraise at at least $210,000.  What should we concentrate on in terms of what makes a house appraise better? I was reading about some people saying wood floors, granite kitchenâ€¦are these really going to make a difference? Do you have any suggestions?
Thanks !
  :lol:  :idea:

Will Barnard · Answer

An appraisal is ONLY one person's opinion (be that it from a licensed pro in the biz, but still an opinion).
As Curt stated, comps will have the most dramatic affect on the price point.
Adding a half or full bath, although does not add square footage, can help as you can now compare your home to comps with homes having more baths. (same goes for bedroom)
Then again, if your design is poor or the home does not have a layout condusive to adding a bed/bath, you could hurt your price opinion, so their must be a plan.

Charles Whitaker · Answer

Following Curt's advice and researching the comps will yield the best results. Walk through the comps in the area and get a feel for what dictates the price. The obvious items are size, features, layout, exterior material, finish work(Tile, marble, fixtures, paint, flooring, etc).

Once you KNOW the comps, you'll know where you need to focus to maximize the return.

Eric Wang · Answer

I agree with Curt.  My appraiser took 2 most recent comp from my area.   Since your in prime location, you shouldn't have a problem.  Location is key, and buyers will see that, nice neighborhood, good school, etc...
Make sure the work looks like it was done by some professional, not some handyman.

Curt Davis · Answer

In my experience the only thing that will help with the appraisal will be recent sales comps in the area. You can make another bedroom but your not adding anymore square footage so it will not help that much. Keep in mind, it does not matter how much extra you do or the fancy expensive upgrades, recent sales will make the most difference.

Ana Hyler · Answer

Thanks so much everyone. All the comments help a lot. As for the improvements, we are starting with a new roof put in this week and hard plumbing worked on.

Dan McGehee · Answer

It varies depending on what part of the country the property is located in but here is what I have seen recently in California (bay area).  Appraisers are becoming increasingly conservative and their opinions of value are focusing on "current" market conditions.  They are factoring in substantial devaluation  and citing distressed sales (like in your case) as causing home values to fall out of equilibrium.  During periods of major devaluation, appraisals become more inconsistent and opinions of value are often very subjective.  My suggestion is to make sure the appraiser you use takes into consideration the fundamentals of the property (ie. location, improvements etc) and the replacement cost versus relying solely on the market sales.

If you plan to use the same appraiser as last time, read through his comments for clues as to what ultimately drove his valuation.  A good appraiser will always explicitly explain & support their valuation.  Have a realtor walk the property and give feedback.  For example, if they say the kitchen looks small relative to the rest of the home, go out of your way to make improvements to the kitchen so that it looks & feels larger.  If they don't like the landscaping, put effort into completely redoing the landscaping.

Sounds like you are going about this in the right way, but just make sure you have a contingency plan in case you don't get your $210k value.

J Scott · Answer

If possible, add a bedroom, bathroom, or half-bath.  Perhaps add additional parking.

New cosmetics help a good bit, especially when there are a lot of low-end comps in the area (e.g., a lot of foreclosures).  For examples, new light/fan fixtures, new plumbing fixtures, new cabinets, new flooring, etc.

Lastly, make sure you're there when the appraiser is doing his appraisals, and do your best to point out everything that was replaced, repaired or upgraded.  While creating a social rapport really shouldn't help in theory, in reality if the guy likes you, he'll do his best to help you out (in other words, make sure he knows what price you're shooting for).

In fact, you should take the opportunity to pull comps that you help your case, and have those avaialble for him when comes to the property.  Use it as an opportunity to ask him questions about how he does he comp analysis, and at the same time, make sure he sees the comps you pulled.

Mark N.A · Answer

Try visiting new-construction high-end properties being offered by builders around your area.  They should know what amenities are 'in' that will raise a house's value.

Do you work with a good Realtor?  They would probably also know.