Another Addition question, this time BEFORE

[puterputz]

Hello everyone,

I joined this forum because I am concerned about overbuilding on to our house and need some advice...(I didn't want what happened to the other guy that added an addition and now his property isn't worth what he thought it would be.)

My question, what is the best way to protect myself against adding to our house without getting hurt when refinancing? Our neighborhood is solid and established in Pinellas Cty, Fl. We have renovated our 1950's ranch by gutting kitchen, updating bathrooms, added the 3rd bedroom, 400 sq ft deck, new windows, new A/C, and new water heater. We used to have a lot of equity, but not now with the market. We now want to add on a Master Bed/Bath with adjoining office/workout rm/baby room which will bring us up to 2010 Sq Ft. and a pool...

We have an equity line already in place, but my concern is that with the market, we may not have enough equity to refinance after we are done with the new upgrades, or enough to not have to carry P.M.I.

I have talked with 2 mortgage people, and they said that until we build, they wouldn't be able to predict what things will be like. I am willing to get a "real" appraisal if this would help in advance. I am hoping they can appraise the house and then give us an idea of what the house would appraise for once we have completed the addition.

How does an appraisal when using comps from area sales, know how updated that home is? Things like bathrooms and kitchens are not permitted items so I don't see how an appraiser would know when they are comparing homes if they are comparing apples to apples.

This is what I do know regarding our property and our neighbors. Our neighbor has redone his house and it is really nice. He is in construction and has an awesome pool and deck, all pavers in back and driveway.

I don't know if I am rambling at this point or if I am making sense..but the million dollar question is:

Is there anyway for me to know in advance by using an appraisal, or ANYTHING to know that I will have enough equity to refinance...and if so, what can/should I do to help not to over build???

Thank you all for your help in advance! We are planning on being in the house for a fairly long time, I just want to do everything I can to make sure that whatever enhancements we do, I will be able to do a refi when all is completed. I am listing for you the basic information regarding our house and the neighbors in case it helps in anyway for you to understand my situation. :new_newbie:

My Property:

3/2/2 1512 Sq Ft.
2005-2006 Comparable Sales $206,000
Market Value $177,300
Need to Refinance for $280,000 when completed which would need to be appraised value at around $360,000 to not have PMI
(Estimating 100k in costs for 680 sq ft. addition, driveway done in pavers, new sod, pool, roof over 400 sq ft deck, new fencing. NEW Sq Ft will total 2010 sq ft)

House presently has updated Kitchen and bathrooms, new flooring, new A/C, and new windows.

House 2 doors down:

2/2/2 1378 Sq Ft
2005-2006 Comparable Sales $281,600
Market Value $239,200
New A/C, Windows, updated kitchen/baths, Pool and Pavers in back, Pavers in front driveway.

 

[Michigan CG]

Mr./Ms. Putz,

You can explain everything you have detailed here and hire an appraiser to appraise your your property BEFORE you do the improvements. I have appraised many properties before they were actually built and then again after they were built.

You need to find an appraiser who can do this type of work. There are many ethical appraisers on this forum as well as other ways of finding someone to do this for you.

I would advise you not to try to find the cheapest appraiser, but one with experience and ethics. You get what you pay for. Ask for a resume before hiring someone.

 

[puterputz]

Thanks for the quick reply,

I am going to have an appraisal done before we decide to do anything, however, the main question is this, after the appraiser has looked over the property currently, can they tell me based on what I tell them I am doing for add on's what it will come back as? I am not expecting them to know exactly, but ball park. For ex. lets say that the house appraises for $225,000 now. If I were to add a pool, then the appraiser should know how that pool will change my value...am I correct?

I want to prevent surprises by over doing it and then not being able to get financing.

Ms. Puterputz (Dana)

 

[Michigan CG]

Thanks for the quick reply,

I am going to have an appraisal done before we decide to do anything, however, the main question is this, after the appraiser has looked over the property currently, can they tell me based on what I tell them I am doing for add on's what it will come back as? I am not expecting them to know exactly, but ball park. For ex. lets say that the house appraises for $225,000 now. If I were to add a pool, then the appraiser should know how that pool will change my value...am I correct?

I want to prevent surprises by over doing it and then not being able to get financing.

Ms. Puterputz (Dana)

Dana,

Please do not hate me when you read this. You are in Florida. My experience is in Iowa, Illinois and Michigan. People spend $20-40,000 on a pool in typical upper middle class houses. In these markets the in-gound pools add about $7-10,000 in value, thus a negative "investment" in a property. Now I have never appraised the really high dollar houses in Michigan (there are very few in Iowa and my part of Illinois), so there might be times when the cost is close to the added value.

In Florida, depending on your market I cannot tell you the value of a pool, but typically cost does not equal value. Most of the time value is less than cost in this type of improvement, but then there are times when value exceeds cost, although that is rare.

Again, a very competent local appraiser can tell you these added values.

 

[puterputz]

Thanks Tim,

I know that the pool doesn't give back 100% ROI., I was just using that as an example. As I said in my first post, we are adding in an additional 500 Sq Ft to include a master bath and bedroom, along with pavers in driveway and some additional items...

I guess you did answer my question...

If I get an appraisal TODAY, that appraiser can tell me the value of my house TODAY and also give me a ball park of what the house would appraise at with the addition of the master bath/bedroom ext. Am I understanding that correctly?

Thanks,
Dana

 

[puterputz]

JUst in case anyone needs the same information...I called a local appraiser (that doesn't do comps) and she suggested that I wait until we actually start to do work and have a "subject to" appraisal done. That means she will come out and do a full appraisal based on the project that we are doing. I would need the plans for her to look at ect ect. So, that does make me feel a better...hopefully not too much will change in 3 months.

 

[Rufus]

My Property:

3/2/2 1512 Sq Ft.
2005-2006 Comparable Sales $206,000
Market Value $177,300
Need to Refinance for $280,000 when completed which would need to be appraised value at around $360,000 to not have PMI
(Estimating 100k in costs for 680 sq ft. addition, driveway done in pavers, new sod, pool, roof over 400 sq ft deck, new fencing. NEW Sq Ft will total 2010 sq ft)

Using your numbers: $177,300 + $100,000 is $82,700 shy of $360,000.

In my market, room additions add roughly 1/3 to 1/2 of what they cost. And this is speaking in general terms only as it varies depending on the neighborhood.

I disagree with your local appraiser inasmuch as there is no need to start construction before doing an appraisal. You do need to have plans and specifications detailing what you plan to do and what quality level the items will be. With that information the appriaser can determine a market value as of the date of inspection using a hypothetical condition that said improvements were complete. To project what the value would be when then renovation is completed is more difficult as that requires forecasting of the market.

I would contact a few other local appraisers and ask the same questions you asked of this one. Let them know the appriasal is for your own personal use and not for a mortgage transaction.

 

[Webbed Feet]

Ms. Dana,

Rufus gave you a good answer. That local appraiser that you called did not. The local appraiser is too mortgage focused and doesn't understand the things appraisers can do. Not a good sign when selecting an appraiser.

Webbed.

 

[toddmallard]

Start the upgrades first than do a subject to. No Way.
1- the market is changing, What the home is worth with or without the additions at this time will change quickly. Probably downwards.
2- The appraised value done "subject to" may not be enough to want to start the project.
An Appraiser will tell you "roughly" what the "estimated" market value is. This is not in stone. This is subject to the opinion of the appraiser. Can we as appraisers tell you if an addition or upgrades are of value?. I think that most additions and upgrades will add value if you don't go overboard. If most homes are 3 bedrooms with pools and yours is a 2 bedroom with no pool, Than a addition of a 3rd bedroom and pool will have value. If most homes are 3 bedroom and no pool, Than adding a 4th and 5th bedroom with a pool, might not have all that much extra value.
Will $80,000 in upgrades bring in $50,000 additional value? Who knows. Do the comparables and active sales have the same upgrades in place and selling for a much lower price due to market conditions?, Than I am afraid the there would be no value. It is a bad market right now. Do what ever you want to enjoy the extras, but as for resale, I would not think about that at this point.
Remember I am only and appraiser. Not a futures trader.

 

[Ruben Ramon]

In my market, most upgrades cost outweighs their contributory value. The only time is when there is something significantly worse than the neighbors. Remember, your neighbors are also doing upgrades as well, and your in competition with them. If you choose to do more than your neighbors, then it could get even worse as you may be overbuilding. Like some of the previous appraisers here, I would not use that appraiser you first talked to. A good question to ask would be, “Are you going to put the appraisal on a 1004.?” If they say yes, keep calling.