Understanding Home Renovations and Appraisals: What You Need to Know

Thinking about renovating your home? Whether it's to create a space you love or to boost its appeal for future buyers, there are plenty of good reasons to update your home. You might also be aiming to increase your home's appraised value to build more equity. However, if raising the appraised value is your main goal, there are some common misconceptions to be aware of.

Key Points to Remember:

• The appraiser’s perspective vs. the buyer’s perspective

• Why it's challenging to guarantee which updates will raise property value

• Features more likely to impact an appraiser’s valuation

• Potential pitfalls of renovating solely to increase property value

Strategize from an Appraiser’s Perspective, Not a Buyer’s

When aiming to boost your home's appraised value, it's crucial to think like an appraiser, not a buyer. Updates that attract buyers may not impress an appraiser. For instance, while a renovated kitchen or new appliances can catch a buyer’s eye, they might not significantly influence an appraiser’s valuation.

Appraisers focus on long-term characteristics that are harder to change, such as location, neighborhood amenities, square footage, and the number of bedrooms and bathrooms. These factors tend to have a more substantial impact on your home's appraised value than newer appliances or cosmetic updates like fresh paint or crown molding.

This doesn’t mean you shouldn’t invest in new appliances or cosmetic upgrades—they can add value. However, it's important to manage your expectations regarding what an appraiser will prioritize.

Why It’s Hard to Guarantee Value Increases from Renovations

It's difficult to guarantee which renovations will increase your home’s value in the eyes of an appraiser because appraisals are educated opinions, not exact science. Predicting how specific upgrades will affect your home’s value is nearly impossible.

While upgrading your kitchen and adding new appliances can increase your home’s value, spending $20,000 on a new kitchen doesn’t automatically raise your home’s value by that amount. Additionally, appraisers look for major structural or systems damage that could detract from the property’s value.

A common pitfall is investing in luxury upgrades while neglecting essential maintenance like plumbing, electricity, HVAC, insulation, and foundation upkeep. Damage prevention often plays a more critical role in appraised value than adding high-end upgrades. Depending on your renovation goals, it might make more sense to prioritize general upkeep and maintenance.

The Bottom Line on Renovations and Home Appraisals

If you plan to renovate to increase your home’s appraised value, remember that an appraiser’s valuation differs from a buyer’s. Simply maintaining your home in good condition and benefiting from rising real estate prices over time can potentially increase your home's value.

Certain renovations, like adding a new bathroom, deck, fence, or finishing the basement, can boost your home’s value. However, since appraisals are based on educated opinions, a $20,000 renovation isn't guaranteed to increase your property value by that amount. It’s essential to have realistic expectations when it comes to appraisals and renovation investments.