When Assessing Home Value, Think Functionality
As real estate agents, we spend a lot of time helping home buyer and seller clients get an accurate idea of the market value of their home, or of the home they’re considering purchasing.
Here’s a quick note about something that came up when I was talking (OK, nearly arguing) with a mortgage agent from the national headquarters of a company who was handling my home refinance, because it might help you when explaining the same concept to clients in the future.
My home appraised lower than I thought it should, partly because the tax records did not reflect a basement area I had finished off, and especially because they did not show that I had turned a half bath into a full bath – so instead of a total of 1.50 baths, there are now 2.
(To be clear, the original half-bath with sink and toilet because a full bath with the addition of a tub and shower.)
The mortage rep didn’t see how going from 1.50 baths to 2 baths, or “increasing the bathroom space by 25%” could make a significant difference in the value of the home.
But I knew from experience that it totally changes the functionality of the home, because now you’ve got two shower/bathtub areas to share, instead of everyone using the same one.
In other words, if you take a three-bedroom home like mine that could easily be lived in by four people, instead of all four people using one shower/bathtub space, there are now just two people per shower/bathtub space. The main functional space has actually increased by 100%. And that carries signficant value.
The boost in value is greatest when going from 1 or 1.50 baths to 2 baths, since in both cases you started out with just one shower/tub space. And you should get nearly (although not quite) the same boost in value just by going up to 1.75 baths (adding a stand-up shower with no tub), since you’ve still doubled the showering (“getting ready for work/school”) space.
The point is, market value is a combination of many things, not just a numbers game. Understanding what the numbers mean in terms how people actually use a home is what helps real estate agents determine true market value.