Project Delivery

About five years ago I designed the renovation our own home which included the addition of a second floor, doubling the square footage.  Included in the planning for the additon were many items that added efficiency and value to the project, but were not visible or apparent.  For example, we added an efficient air conditioning system with five zones, tankless water heater, extra insulation, high efficient windows, metal roof, etc.  The appraisal was about what we expected and miracluously, exactly what our loan application was for!

About 18 months ago we decided to refinance our home to take advantage of the lower interest rates which would save us around $200 per month.  An appraiser visited the home and spent about two hours looking around and talking to my wife and me.  We walked him through the home and pointed out many of the things that were done that were not apparent to the casual viewer.  He was very receptive and entered in a conversation about many of the items, including how the landscaping worked with the home aesthetically as well as providing maturity and energy efficiency.  When his appraisal was made, he used "comps" as usual (although none of them seemed even closely "comparable"), but, to his credit, he did make special note of many of the items we discussed and he added value to the home for these.  The appraisal was very favorable.

This past week, when the current interest rates dropped to a startling 3.5%, we started the process to refinanced our home again to take advantage of the current lower rates.  Even though it was only 18 months after the previous appraisal, the bank required a new appraisal.  Remembering the previous appraisal, I prepared a list of about twenty items describing the major features that were not obvious, but added value to the design.

This time a different appraiser arrived to make his inspection, but before he began, we sat down and I explained the document I had prepared.  After reviewing the first item he informed me that he could not give any added value to any item that was not "comped" in another home.  I responded, "What if a home has a fire sprinkler system installed and receives credit from his home insurance company?  Surely that adds value although not found in 99% of the 'comps'."  His response was along the lines of, "If it can't be found in a "comp", he is not allowed to give any credit."  However, he admitted there was extra value here and the home was above average.  He did take the list and even complimented the design, site and curb appeal of the residence.  He spent maybe 30 minutes on site, including our meeting and his measuring.  I have yet to see his finished appraisal, so I cannot comment on the final results.

This mindset reminds me of the "drawers" (men's briefs) thrown at me at boot camp, when issued my first military clothing.  I wondered how the throwers knew my underware size, but soon realized their secret.  Around the waist, on each side, was a series of loops and snaps that could reduce the size 50 brief into any waist size you wanted!  One size fits all.  So it is with "comps".

For anyone going through the appraisal process and if the situation warrants it, I would suggest the designer at least meet the appraiser at the site and make him/her aware of the design value of the project.  In my opinion, it was beneficial to give the appraiser something to refer to when filling out the appraisal forms.  It also may serve as justification for any value they might add.

    
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Richard Barron AIA
Jackson MS
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I guess Richard Barton's situation makes sense to someone smarter than me.  No value added unless it comps?

Since so many homes are tracts with very similar plans, features, quality, etc, the only difference in value will be the improvements made by homeowners.  So if a homeowner puts in a pool or professional landscaping, does it comp?

Tim Mead, AIA
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Timothy Mead AIA
Timothy N. Mead, AIA, Architect
Phoenix MD
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Improvements are much like tax deductions. For every $4 you spend, you typically get about $1 in value. This depends on the Appraiser and the situation. If you're renovating your house and you need a bank loan, then the bank's appraiser has to value your project. A kitchen renovation is viewed as giving the most value back as an interior renovation, yet if an Appraiser sees that there was a Kitchen there to begin with you might get $5-8K value increase despite the fact that you spent up to $30K.

If you're just trying to sell the house and you renovate the Kitchen, then you'll likely get little back in value as your home will be compared to the "comps" in the area. Since Spec houses are the only houses that sell at new prices (highest value/sf) they drive the values in almost every area. No matter how good of a job you do over the spec houses in your area, they will dictate your value. 

After designing many, many renovations to small houses to make them medium to large sized houses, I can tell you that the only significant gain in value that a project can get is to add floor area. New floor area in my neck of the woods can give you almost 2x the value of what it costs to build. In order to get regular people projects to appraise, there is a balance of added floor area needed for every inch of renovated old floor area. This makes preservation projects next to impossible. If saving most of the old house and adding a minimal amount is part of the program, then your owner will likely pay out of pocket for much of the project. You essentially get 1/4 of the value spent and in the case of historic structures you're probably spending even more to get less, depending on how bad of shape the original building is in.

Appraisal reform would allow us to value preservation projects correctly as well as sustainable projects. There is an argument that houses over 50 years old should be treated like antiques. Refurbishing them to historic district standards should give you higher value like restoring a '57 Thunderbird to "cherry" condition would. Energy efficiency is a no brainer for most, but a better perfuming product is worth more in every market place, why not buildings? Right now they are all being held hostage by the mass production "artists" building spec houses in your area. Every building is NOT exactly the same and it's about time we insist they be judged as individual products for what they really are. Spec houses tend to be the worst quality houses in America, yet they are judged more favorably only because they are new and they are the ones for sale. A beautiful Architectural home is typically sold decades after it's designed and contributes nothing to the value of the neighborhood until it does sell at used prices, yet these people are typically paying the highest mileage rate on their property taxes, contributing more to the infrastructure and school systems in the neighborhood. Taxation without representation.

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Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
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Show Original Message -------------------------------------------
Original Message:
Sent: 07-11-2012 17:34
From: Timothy Mead
Subject: No value added

I guess Richard Barton's situation makes sense to someone smarter than me.  No value added unless it comps?

Since so many homes are tracts with very similar plans, features, quality, etc, the only difference in value will be the improvements made by homeowners.  So if a homeowner puts in a pool or professional landscaping, does it comp?

Tim Mead, AIA
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Timothy Mead AIA
Timothy N. Mead, AIA, Architect
Phoenix MD
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