Valuing the Nicest House in the Neighborhood

Even same isn’t the same, in housing. Homes that are the same size, same plan/design, when they were built, can evolve through the years to be very different. We see this in older subdivisions with the more old, more changed homes different from each other, even though they were the same when they were built. This presents a problem for appraisers and realtors alike, and can be a great exercise in home value maximization.

Of course homes that are not the same plan, not the same size, introduced even more differences. Sometimes a home is superior to the others on the street, superior to the neighborhood even . It may be larger, the plan may be more tractive or maybe it’s just more beautiful. And then of course that beauty can be attributed to many different features.

So when a home is superior to all of its nearby natural comparables, how does one accurately value it? How is the difference, or set of differences, accounted for without similar enough data?

This is an outside-the-box situation, the problem of valuing the nicest home in the neighborhood.

For a valuer, be it an appraiser, or a realtor, the first course of action when addressing the nicest home in the neighborhood which is outside of the box is to consider expanding the box. All variables of the home value, especially the ones causing the out of the box value situation, should be considered. And I say considered intentionally here, we’re doing some zoomed out thinking on what is reasonable, what is fair, what is credible, and what will create the best realistic result. Many times the location/distance of the comparables from the subject property needs to be expanded with a larger radius to include other subdivisions, other neighborhoods, sometimes different counties, different towns, or even in a different state! Sometimes it may be necessary to look back further in time from the valuation date to find adequate comparables. Appraisers are generally discouraged from doing this when working for lender clients, but it is a reasonable method as long as the market conditions adjustment is well vetted. Specific searches of the unusual feature are easier if it’s an objective number or a searchable word then if it’s a more subjective difference. The subjective differences are design/appeal adjustments, quality adjustments, and condition adjustments. Different people, different realtors, different appraisers different homeowners, will handle this differently as there is no one way to definitively value subjective differences. Too many will do nothing as they don’t feel they can support this subjective adjustment. Others use various percentages, ratios or estimated price per square foot factors. To me, the most important thing is that a reasonable effort is made to property present the value in the appropriate likeness of the superior home.

The uncertainty in exactly how to deal with the “nicest house in the neighborhood” problem is one thing the National Center For Home Value Maximization is equipped to deal with. Please give us a call to in your quest for protecting your asset.