Swimming Pool Valuations

[lindasheets]

:question: We have a $35,000 heated, large, custom-designed pool, (fairly new), fountains, flagstone decking, oversized spa and more than $10,000 in tropical landscaping, including 7 very large, mature palms. The VA appraiser says that at the most she can give us $10-12,000 credit. Why is this? Who sets these artificial limits? (This is in the Houston area, where swimming pools are an asset with the 100 degree summers!)

 

[David S. Roberson]

Linda,

I'll leave it to someone local to reply to the specifics of your situation, but keep in mind:

Some people don't know how to swim, & have no use for a pool.

Some don't want the liability & higher insurance premiums associated with a pool.

Some don't want the associated maintenance costs.

You have to look at the overall market, not just the sub-market of pool enthusiasts.

 

[lindasheets]

Yes, but why would someone who doesn't want a pool look at a house that has a pool? You don't deduct for a house being one-story or two-stories, when a significant part of the population will prefer one over the other? A pool is a valuable feature -- if you don't want that feature, leave the house for those that do.

 

[walt kirk]

Linda,
If you as a buyer were looking at two identical houses, one with a pool and one without, how much more would you pay for the house with a pool? As with anything else probably not as much as the cost to build it.

If you had small children or animals, or if you couldn't swim would you even look at a house with a pool?

 

[George Hatch]

Linda,

Appraisers don't make rules about these types of adjustments in an appraisal. If the appraiser thinks the contributory value of the pool is less than 1/2 of what it cost new, it's because the market data in your area is telling them that. Personally, I wouldn't pay a dime extra for a pool where I live (San Diego County). However, my personal preferences are irrelevant when it comes to my work. I adjust for whatever my data tells me to adjust. There are some neighborhoods in this region where pools are so common that to not have one represents a deficiency. Even so, the adjustment there aren't equal to the cost of a new pool with all the trimmings. The predominant trend nationwide is such that pools almost never recover their cost of construction in the market. It's so common that we use the example of built in pools to illustrate the concept that cost does not equal value.

If you want to dispute the adjustment, you can try to find sales data of homes in your area with pools and compare them to similar homes without pools, the difference being attributable to the contributory value of a pool. The only catch is that the comparisons between those with and without pools have to involve extremely similar homes. As in, same size, same age, same neighborhood, etc.. This is the technique your appraiser used to establish the adjustment factor they used, at least I hope they did.

Don't bother with showing the appraiser how much you spent because (not that you really want to hear this) that's irrelevant. The only thing that matters is how much the typical buyer would pay extra for it.


George Hatch

 

[Restrain]

I used to live in Houston and appraise there and I have seen more than one "concrete lined" garden where the pool was filled in. Don't confuse Cost and Value. Cost is what you spent on the pool, while Value is what the thing will bring vs. a similar home without one. While the VA appraiser MAY be low, the only way is a comparison of sales. But do not expect full value. If you get 2/3 of value, you're doing great, while 50% is quite often what I see with pools. I have seen some homes with pool that contribute nothing, so, in answer, it depends.

Roger

 

[Pamela Crowley (Florida)]

I'm in Florida where we have many residential pools. I see anywhere from $0.00 to $25,000 for a pool. The $25,000 would be a very large, very ornate, full screen enclosure pool in a subdivision of large high-end estate type houses. Those at the $25,000 level adjustment for that pool probably paid around $50,000 for having it built.

There are statistics appraisers use to make these determinations. Realtors have no clue about running those statistics.

Similar to you looking at a two properties that you are interested in buying, both are identical, side by side, on small acreage parcels - except - one of them has a 3 stall horse barn. You don't have horses, but you think it's a pretty interesting idea to maybe have horses, your children love the idea.
How much extra are you willing to pay for that barn??? After all, it cost $20,000 to build. Then again.... do you really want your children to get into horses? They cost a lot in maintenance and might be dangerous.

Same thinking many buyers have regarding a pool.

 

[Tom McDowell]

Hi Linda. Welcome to the forum. I would concur with everything that has been posted above. We have a thing in appraising called Matched Pairs Analysis. That is where we look in the market to see how much an amenity, IE pool. I have found pools that have actually caused a deduction instead of an addition to value of the subject.

Why do you want to get a VA loan on a home in this price range? There are loans available in the conventional market that offer better rates and terms. The major benefit of a VA loan is the lack of a downpayment.

 

[lindasheets]

I wish we didn't have a VA buyer -- and will never accept one again, if this deal goes South. We have an oustanding home, this buyer agreed to a price which was a very fair market value after it was only on the market for 1 week (he'd been looking for 7 months and knew this is what he wanted and that it was a good value). Now they're coming in with a low-ball VA appraisal and want us to give it away. NOT!

 

[Dee Dee]

Linda,

Since none of us know your market it's impossible for us to say whether or not the appraiser was low on his appraisal. You have the option of not accepting the potential buyers lower offer if you feel it is unfair, so you are in control of the situation. If the appraisal was truly out of sync with the market, then there will be more purchase contracts in the near future.

I had an interesting discussion with a local Realtor in my area just yesterday.
She told me that several of the higher volume agents in her office didn't want to take on any new listings because it was so expensive to advertise the growing number that they already had, especially since none were selling to help cover the costs. She said that many of the homeowners/sellers were asking their agents to go back to early offers that they had previously declined to see if the potential buyers were still interested, and most were not. The majority of the most desperate sellers had high end homes with expensive upgrades.

Good luck to you, I hope that you get every penny that you think your home is worth, but keep tuned in on what is happening to high end homes in your market. What you percieve as an insult now could be the good one you let get away. Only time will tell.