Q: Recently, I did substantial renovations to my home amounting to over $75,000. Shouldn’t the cost of my home improvements increase its appraised value?
Appraised value isn’t simply an equation of how much someone spends on home improvements. It’s more of a comparison to other homes within your immediate neighborhood of similar size and value.
As a rule, there are more people selling homes than there are people looking to buy homes in a buyer’s market. In a seller’s market there are more people looking to buy homes than there are people selling homes. Since the beginning of February 2021, Central Florida has become a seller’s market with homes selling almost as quickly as they are listed by Realtors.
What we know is that during a seller’s market, sellers don’t need to give away their homes for nickels and dimes based on an appraised value, especially if the seller has just made improvements. It’s a time sellers can negotiate market value (greater dollar value), and the buyer may be willing to pay more because your home has more to offer than your neighbor’s home.
For example, if your home has a 3,000-square-foot brick driveway and a large swimming pool, while most neighbors have concrete driveways and small pools, the value for your driveway and pool may not increase your home selling price. So, what determines the real value?
In a buyer’s market, an appraised value is often no more than a comparison of homes that are in abundance, leaving the seller with little negotiating ability. On the other hand, when there is a scarcity of homes available in a seller’s market, the market value gives the seller a greater opportunity of recovering much of the value for brick driveways and larger pools. It takes an educated Realtor who’s looking out for the seller and sees the real value rather than looking out for themselves to obtain a quick commission.
Also, in a seller’s market, the seller has greater control over the sales contract. The seller may decide to remove contract contingencies that favor the buyer, such as conditioning the sale upon an appraised value, a home inspection report or specific types of financing.
In a seller’s market, because there is a short supply of homes for sale, the seller should also consider consulting with a real estate attorney to discuss details of contract advantages. Understand that Realtors have the responsibility to both the buyer and seller to negotiate the conditions of the contract whereas it’s up to the seller or buyer to emphasize or demand changes to those conditions. Realtors cannot advise you on the law, only an attorney has that ability.
In Central Florida’s seller’s market, you need an attorney to best advise you on sales contracts and asset planning, a Realtor to sell your home and a title, escrow and closing firm to manage your closing. Your greatest advantage is a firm like ours that can do it all.
About the Authors
Kristen Jackson, the founding partner of Jackson Law P.A., handles all aspects of estate planning and real estate law. Chuck Jackson manages real estate sales and works closely with Kristen at closings as the firm’s real estate title and contracts manager. For more information, visit www.JacksonLawPA.com and www.JacksonFloridaRealtor.com.