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Finished Attic Valuation

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dougt100

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Freshman Member
Joined
Mar 12, 2008
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General Public
State
North Carolina
We're in the process of finishing a walk-up attic (3rd floor). The area will include a large bedroom/multi-purpose room, full bath, and large closet. There is a dormer/doghouse off of the bedroom area that has two large windows.

The total finished attic area will be about 680 sq ft. It will be finished in similar fashion as the rest of the house (currently 4160 sq ft). There is also an unfinished, walk-out basement of about 2000 sq ft.

Is there a general rule-of-thumb to spectulate what the increase in value will be from the attic? The average $/sq foot in our neighborhood is about $150 to $170, and the home will be "average" in size compared to the other homes (range in size from 3000 - 5500). We live in Raleigh, North Carolina.

I realize that there is no substitute for an official appraisal...

Thank you in advance for your time!
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
Hello Doug - welcome aboard.

"Is there a general rule-of-thumb" to speculate what the increase in value will be"

No. Improvement Cost has no bearing on market value. Contributory Value is determined by the market (i.e. confirmed sales most similar to your property AFTER the proposed expansion)

Feasibility Appraisals by local Ethical, Experienced, Appraisers are done daily based on plans & specs with value opinions rendered "Subject to completion" i.e. Opinion of Market Value AS IF the improvements had been completed.

Strongly recommend your advisory team should include a licensed architect, contractor, lender, and appraiser ......with a feasibility appraisal included as integral in determining what prudent improvement upgrades, if any, will return more than Cost.

"I realize that there is no substitute for an official appraisal..."

Correct.
 
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Thomas Fiehler

Senior Member
Joined
Jun 2, 2003
Professional Status
Certified General Appraiser
State
Ohio
Doug-You are right in that an appraisal is what would be needed. You mentioned the $150-170/SF. Just remember that includes the rest of the house, site and any other amenity that the property has. The actual amount per s.f. for this area will be a fraction of that.
 

Sid Pachter

Sophomore Member
Joined
Feb 26, 2008
Professional Status
Banking/Mortgage Industry
State
Florida
All adjustments come from the market. You should engage an appraiser to provide an opinion of market value. The report should be made subject to completion of the attic conversion and the comps used by the appriaser should be able to bracket the finished attic feature. By the way do you need permits for the conversions to living area?
 

dougt100

Thread Starter
Freshman Member
Joined
Mar 12, 2008
Professional Status
General Public
State
North Carolina
Thanks for all of the insight thus far - it has definitely confirmed what I had been thinking - and thanks for noting that the finished space would be a percentage of the $/ft. The value of the house does already take into account an unfinished basement and attic.

Great question on the permits. Yes, permits are required, and since I am the homeowner doing the work... (1) it has to be my primary residence, (2) I cannot be renting the space, and (3) I have to have the intention of living in the house for 1 year. Otherwise, people could circumvent the regulation for General Contractors... and the quality of the work could suffer. (4) Permits in total - Building, Mechanical, Electrical and Plumbing.
 

Jungle Boy

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Joined
Oct 30, 2002
Professional Status
Real Estate Agent or Broker
State
Florida
Doug

Some thoughts:

If you're adding the finished attic space for your own enjoyment/needs, then don't worry too much about the value. Chances are that the value won't go down. My opinion is that any finished area is worth more than unfinished area. How much more, I can't tell you.

Also remember, that even if it doesn't increase the value (most probable selling price- "value in exchange"), there's always a chance that someone will love the finished area and perhaps pay more for it ("value in use"). Price does not equal value.

If you are going to do the work, and if you don't consider your time (opportunity cost) too expensive, then go for it.

These are just thoughts, and shouldn't be considered professional advice.
 

TEL2002

Elite Member
Joined
Jan 16, 2002
Professional Status
Retired Appraiser
State
Louisiana
How many similar homes in your area have a finished attic? If none, you have a unique home and it will be very tough to gage what the true impact of your finished attic will be. If there are several, check out their sale prices as compared to homes without a finished attic. This might give you a hint as to the added value for having a finished basement. If too tough to figure out, hire a good local appraiser.

Is a 3rd floor bedroom safe for children...in case of fire? Will there be some kind of emergency exit system that doesn't require someone to drop 25' to the ground? (Think in terms of the first floor being on fire and someone trying to escape from the 3rd floor.) Now, in your mind, does the 3rd floor have similar value as the 1st & 2nd floors? Would a typical buyer consider these safety issues?
 

Wayne Tomlinson

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Joined
Jan 25, 2005
Professional Status
Certified General Appraiser
State
Illinois
In a recent appraisal in a neighboring town, there was just such an arrangement on a house that I looked at for a comp.

This is an attractive home in a good section of town.

My problem with this comp was that it had just sold for substantially lower than the previous sale.

Turned out that the finished attic was created between the sales.
With the layout, the third floor was just too far out of the way to be conveniently used.
I was told that the house was shown several times and finally the owner just took the first actual offer.

I would not recommend such and improvement. If you do it, you will probably just have to eat it.

Wayne Tomlinson
 

dougt100

Thread Starter
Freshman Member
Joined
Mar 12, 2008
Professional Status
General Public
State
North Carolina
That's worthwhile info to consider. I am sure that hiring a contractor to do all of the work would be a no-go situation. Since I am the "grunt" on the project (neglecting opportunity cost), then the "direct" costs are far less... probably 1/5 of what a GC would charge.

I can understand the proximity issue... it makes sense if the space is too far away.

The other feature of this bedroom/multipurpose area is that it will be wired as a theater room. So, prospective buyers may be more willing to make the journey to the third floor. Plus a wet bar and full bath will only be 20' away.

All in all, it's going to be a play area for my 3 year old son... and we're okay with the expenditure (since it's relatively small) if we have to eat the costs.
 

NC Old Guy

Junior Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
North Carolina
Don't forget the HVAC. Even if your 2nd floor unit was "sized" to allow finish, there is NO way to adequately control the climate on the 3d floor from the 2nd floor thermostat. Will make the space much more useable. Doing it yourself? Admirble but I do hope your sheetrock skills are more than the typical homeowner. If not now, take the time to learn how to do it correctly. Not much worse than an inadequate sheetrock job, especially when it goes back on the market.
 
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