Type of Home Renovation Key to Value: Appraisal Institute

The Appraisal Institute, the nation's largest professional association of real estate appraisers, today encouraged homeowners to carefully choose renovation projects in order to maximize their return on investment.


"Home improvement projects are not necessarily investments in which a homeowner should expect a dollar-for-dollar return," said Appraisal Institute President Scott Robinson, MAI, SRA, AI-GRS. "Rather, these projects can increase the likelihood of a sale, or that a property will be comparable to other properties in a neighborhood."

According to Remodeling magazine's most recent Cost vs. Value report, the projects with the highest expected return on investment are attic insulation, manufactured stone veneer and garage door replacement. Other projects with potential payoffs, according to the report, are entry door replacement (steel and fiberglass) and minor kitchen remodel.

View a video of Robinson addressing home improvement tips.

Robinson advised homeowners considering renovation projects to consider if the improvement is in keeping within what's standard in the community.

"Projects that take a home significantly beyond community norms are often not worth the cost when the owner sells the home. If the improvements don't match what's standard in a community, they'll be considered excessive," Robinson said.

He also noted that homeowners may find it best to hold off on big renovations if they're unsure how long they will be in their home. The longer a homeowner stays in a property, the greater the opportunity for a return on investment, Robinson said.

For an unbiased analysis of what their home would be worth both before and after an improvement project, a homeowner can work with a qualified real estate appraiser – such as a Designated Member of the Appraisal Institute – to conduct a feasibility study.

During a feasibility study, the appraiser will analyze the homeowner's property, weigh the cost of rehabilitation and provide an estimate of the property's value before and after the improvement. By purchasing an energy-efficient product or renewable energy system for a home, the owner may be eligible for a federal tax credit based on EPA-established guidelines. (See thecomplete list of eligible products, including program expiration dates.)

The Appraisal Institute offers a free, informative brochure titled "Remodeling & Rehabbing," which provides consumers with valuable advice on home improvement projects.

Appraisal Institute Shares Property Tax Appeal Tips

Homeowners who are considering property tax appeals should be prepared with all the relevant information and be mindful of local rules, the nation's largest professional association of real estate appraisers said today.

As many U.S. homeowners begin receiving their local property tax bills, the Appraisal Institute offered suggestions to make the appeal process easier.

The amount of property taxes due to local municipalities is typically based on the location and assessed value of the home. Consumers also should understand that the assessed value of a property can change over time if, for example, improvements are made.

"There can be a big difference in property taxes from county to county and state to state. Regardless of where one lives, it's important to know how property taxes are calculated locally and to follow all related legal requirements," said Appraisal Institute President M. Lance Coyle, MAI, SRA.

While consumers might think they have a good idea of whether their property has been properly assessed, it's much easier to make the case that their taxes are too high if there's a professional appraisal to back up the argument. Homeowners should consider having an independent appraisal prepared and present the appraisal report to the assessor because appraisers are third-party experts who provide credible opinions of value. Consumers also should be mindful of Internal Revenue Service rules.

"Many homeowners recently filed tax returns with the IRS. Looking ahead to future tax filings, it's important to understand that the agency has specific rules about the deductibility of property taxes, and consumers should with check with their tax professionals accordingly," Coyle said.

There can be various stages of tax appeals based on the municipality, and Coyle suggested that homeowners consult with their assessor's office or a local appraiser who can provide expertise. An experienced appraiser can also shed light on the local appeals process.

"Homeowners should be sure to hire a highly competent, well qualified appraiser, such as a Designated member of the Appraisal Institute," Coyle said.

To find an appraiser, go to the Appraisal Institute's website and use the Find An Appraiser function.

Is Population Growth a Strong Indicator of Home Prices? Pro Teck's Home Value Forecast Examines Population Growth Impact on Home Values

This month, Pro Teck Valuation Services' Home Value Forecast (HVF) update examines the top three markets in terms of population growth from 2000-2014 and looks at housing trends in these areas to see if home prices correspond with population changes. The Villages in Florida as well as Midland and Austin, Texas ranked the highest in terms of population growth percentage and also are benefiting from stronger housing markets.  The monthly top and bottom ten ranking of metro area also is updated. 

"Although metro areas may differ from each other in terms of economy, industry and generations, the higher population growth areas are at or near all-time highs in home prices and do not show much impact from the housing crisis," said Tom O'Grady, CEO of Pro Teck Valuation Services.

The HVF authors examined a recent US Census analysis, which ranked 381 metropolitan statistical areas by their percent change in population from 2001-2014.  HVF then compared the top three areas of growth in terms of percent change against home price appreciation using Collateral Analytics Forecast.  Here is what the authors found:

• The Villages in Florida is a rapidly growing retirement community.  The average age is 68.7 years, the oldest in the country and almost 30 years above the US average age of 36.8.  Home prices in The Villages are expected to rise over the next five years from $220,000 to nearly $300,000.
• Midland, Texas' growth in the last four years can be directly linked to the energy business, with 13.6% of the population involved in the mining, quarrying, and oil & gas extraction businesses.  While falling energy prices might negatively impact growth, HVF authors see home prices as of now also rising from approximately $220,000 to $300,000.
• Austin, the capital of Texas, was known first as a college city, then a technology manufacturing hub and finally today as a professional services hub.  Reflective of its college city roots, the average age in Austin is 31.1.  The HVF update shows a more modest growth in home prices over the next five years, but still a steady increase from $250,000 to closer to $300,000.

This month's Home Value Forecast update also includes a listing of the 10 best and 10 worst performing metros as ranked by its market condition ranking model.  The rankings are run for the single-family home markets in the top 200 CBSAs on a monthly basis.  They highlight the best and worst metros with regard to a number of leading real estate market indicators including: sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio and foreclosure percentage and REO activity.

"There are 7 California markets in the top ten this month.  Two of the California markets (San Francisco and San Rafael) had active sales prices of more than $1 million," said O'Grady.  "Denver was the most active market this month in terms of sales activity, andBellingham, WA continue to lead the top ten."

March's top CBSAs include:

Bellingham, WA    
Denver-Aurora-Lakewood, CO   
San Antonio-New Braunfels, TX   
San Francisco-Redwood City-South San Francisco, CA   
San Diego-Carlsbad, CA   
San Jose-Sunnyvale-Santa Clara, CA   
San Rafael, CA        
Santa Rosa, CA    
Vallejo-Fairfield, CA       
Yuba, CA

"Foreclosure sales as a percentage of total sales is still driving the bottom ten for this month," added O'Grady.  "Even with higher sales activity, the markets still have a way to go before they see a full recovery as most of these markets continue to also have much higher months of remaining inventory."

The bottom CBSAs for March were:   

Fort Lauderdale-Pompano Beach-Deerfield, FL   
Gary, IN    
Huntington-Ashland, WV-KY-OH   
Jacksonville, NC    
Lake County-Kenosha County, IL-WI     
Miami-Miami Beach-Kendall, FL     
Pensacola-Ferry Pass-Brent, FL    
Saginaw, MI    
Scranton-Wilkes Barre- Hazleton, PA    
Youngstown-Warren-Boardman, OH-PA  

About Home Value Forecast

Home Value Forecast (HVF) is brought to you by Pro Teck Valuation Services.  HVF provides insight into the current and future state of the U.S. housing market, and delivers 14 market snapshot graphs from the top 30 CBSAs.

Minor Home Improvements Offer Best Return, Appraisal Institute Says

The Appraisal Institute, the nation's largest professional association of real estate appraisers, today advised homeowners to choose upgrades instead of major remodeling projects to see the greatest potential return on investment. 

"In general, simpler, less expensive projects have the best cost-to-value ratio," said Appraisal Institute President M. Lance Coyle, MAI, SRA. "With the spring home buying season around the corner, homeowners should invest in projects that are most likely to preserve the value of their homes."

According to Remodeling magazine's most recent Cost vs. Value report, only five projects saw their cost-to-value ratios rise in 2014: roofing replacement, garage door replacement, 20-gauge steel entry door replacement, vinyl siding replacement and fiberglass entry door replacement. Among projects with the biggest declines were two-story additions, composite deck additions, master suite and kitchen remodels.

Other minor projects with potential major payoffs, said the Cost vs. Value report, are mid-range and upscale garage door replacements, manufactured stone veneer, mid-range window replacements and minor kitchen remodels.

Coyle said that some homeowners might choose to fund home upgrades with tax refunds. Before calling a contractor or heading for the home improvement store, however, he said they should consider if the improvement is in keeping within community norms.

"It's possible that consumers won't be able to recoup the cost of the upgrade when the home is sold, so it's important to meet, not exceed, what's standard for the neighborhood, and to also consider expected length of time in the property," Coyle said.

He also said that making routine home repairs is essential to maintaining a home's value. A house that has been well maintained likely will have a higher value than a similar house that is in disrepair, Coyle said. For example, replacing worn out trim boards may in certain situations not add any additional value to the home, other than to preserve the value that would be likely as evidenced by sales of similar homes in the area that do not have worn-out trim boards. 

For an unbiased analysis of what their home would be worth both before and after an improvement project, a homeowner can work with a qualified real estate appraiser – such as a Designated member of the Appraisal Institute – to conduct a feasibility study.

During a feasibility study, the appraiser will analyze the homeowner's property, weigh the cost of rehabilitation and provide an estimate of the property's value before and after the improvement.

Some green and energy-efficient renovations – such as adding Energy Star appliances and extra insulation – are likely to pay the homeowner back in lowered utility bills relatively quickly. Lower utility costs also are a draw for potential homebuyers. When valuing a home, the appraiser evaluates local supply and demand for green and energy-efficient properties and features.

The Appraisal Institute offers a free, informative brochure titled "Remodeling & Rehabbing," which provides consumers with valuable advice on home improvement projects.

Stay connected with the latest news from the Appraisal Institute by following us on Facebook, Twitter, LinkedIn, YouTube and our blog, Opinions of Value.

The Appraisal Institute is a global professional association of real estate appraisers, with nearly 21,000 professionals in almost 60 countries throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Individuals of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA, SRA, AI-GRS and AI-RRS designations. Learn more at www.appraisalinstitute.org.

Drop in US Real Estate Appraisers Slows: Appraisal Institute Research

CHICAGO -- The number of active real estate appraisers in the United States fell less than 1 percent in the first half of 2014, the Appraisal Institute announced today, lower than the average annual decrease of 2.6 percent over the past six years.

Research conducted by the nation's largest professional association of real estate appraisers found that as of June 30, the total number of active real estate appraisers in the U.S. stood at 80,500, down from 81,050 on Dec. 31, 2013. A broader analysis suggests the rate of decrease could rise sharply over the next five to 10 years due to retirements, reduced numbers of new people entering the appraisal profession, economic factors and greater use of data analysis technologies, Appraisal Institute research found.

"As appraisers leave the profession, the Appraisal Institute is preparing the next generation through its education, publications and other training," said Appraisal Institute President Ken P. Wilson, MAI, SRA. "As the real estate valuation profession's leader, we will continue to ensure that we are preparing tomorrow's appraisers today."

The Appraisal Institute's research also found that the proportion of licensed appraisers in the U.S. continues to decrease and stands at 11.3 percent as of June 30. The proportions of certified residential appraisers (56.7 percent) and general/commercial appraisers (32 percent) increased slightly from year-end 2013. Also, 18.5 percent of appraisers held a license or certification in one or more states outside their home state. That number increased slightly from 18.2 percent in 2013 and 17.2 percent in 2012.

Appraisal Institute surveys also found:

• Two-thirds (66 percent) of appraisers have spent at least 15 years in the valuation profession.
• Thirty-nine percent work as sole proprietors (no employees/partners), and another 22 percent are an owner or partner in a firm.
• Forty-one percent work as commercial appraisers, while 31 percent are residential appraisers.
• Seventy-five percent work for an appraisal services firm.
• More than half (51 percent) are ages 51 to 65, and another 11 percent are 66 or older.
• Fifty-eight percent hold a bachelor's degree, and another 20 percent hold a master's or doctoral degree.
• Forty-seven percent of Appraisal Institute professionals earn more than $100,000 per year, compared to 22 percent of non-AI professionals.

Only Certain Home Improvements Pay Off, Appraisal Institute Says

CHICAGO  -- The Appraisal Institute, the nation's largest professional association of real estate appraisers, today encouraged homeowners to exercise good judgment when deciding which home improvement projects to take on, saying that not all renovations enhance property values.

"It's very important that renovations stay within, but not exceed, community norms," said Appraisal Institute President Ken P. Wilson, MAI, SRA. "If they don't match what's standard in a community, owners could have difficulty recouping their investment when selling the property."

According to Remodeling magazine's most recent Cost vs. Value report, some of the projects with the highest expected return on investment are entry door replacement (steel), deck addition (wood), garage door replacement, attic bedroom and minor kitchen remodel. Other renovations with high expected pay-offs include window replacement (wood and vinyl), siding replacement (vinyl) and basement remodel.

Wilson advised homeowners that it may be best to hold off on major renovations if a homeowner isn't sure how long they will be in the home. The longer a homeowner stays in a property, the greater the opportunity for a return on investment, he said.

"Consumers should be aware that cost does not necessarily equal value," he added.

For an unbiased analysis of what their home would be worth both before and after an improvement project, a homeowner can work with a professional real estate appraiser – such as a Designated member of the Appraisal Institute – to conduct a feasibility study.

During a feasibility study, the appraiser will analyze the homeowner's property, weigh the cost of rehabilitation and provide an estimate of the property's value before and after the improvement.

Some green and energy-efficient renovations, such as adding Energy Star appliances and extra insulation, are likely to pay the homeowner back in lowered utility bills relatively quickly. Lower utility costs also are a draw for potential homebuyers. When appraising a home, the appraiser evaluates local supply and demand for green and energy-efficient properties and features.

The Appraisal Institute offers a free, informative brochure titled "Remodeling & Rehabbing," which provides consumers with valuable advice on home remodeling.

Stay connected with the latest news from the Appraisal Institute on Facebook, Twitter, LinkedIn, YouTube and our blog, Opinions of Value.