Trends in Home Appraisal

A letter from an experienced Vermont appraiser crossed my desk last month. He wanted to know how Craftsman’s appraisal tools handle several trends in residential construction. Good question.

Energy-Conscious Design

This VT appraiser asked how Craftsman adjusts costs for homes with superior energy packages. In his experience, homes built to minimize heating and cooling loads cost from 5% to 15% more than conventional homes. I won’t commit to those numbers. But I agree that homes built today offer buyers more opportunities for energy-saving upgrades. Case in point: Last May, Maryland started requiring builders to tell their clients about tax credits for energy-efficient options. (Maryland Business Regulation Code § 4.5-603.)

Still, evolving energy standards are nothing new. Home builders have been on an energy-conservation binge since at least the oil shock of 1973. Craftsman published the Minimum Energy Dwelling in 1977. Since then, residential energy standards have improved every year. What was cutting edge design ten or twenty years ago is the bare minimum now. Our frame of reference has changed.

My recommendation: evaluate energy-efficient design the same way you would appraise better quality anywhere in a home. Craftsman’s appraisal tools offer six quality choices, from Minimum to Luxury, for each of the dozen major parts of a home, from foundation to roofing. When you see built-in energy savings, boost the quality rating on that part of the home. I’ll be surprised if the increase doesn’t fall in the 5% to 15% range.

One possible exception: A PV solar array can add six figures to the cost of a home. But I wouldn’t routinely add the cost of installed solar to any home appraisal. Think of a solar home as you would of a home with a Ferrari parked in the garage. It doesn’t change the home value. The same with solar. The PV array on the roof is probably leased from a solar investment company. Most solar energy systems can be uninstalled and relocated elsewhere. And the useful life expectancy of solar add-ons is much less than the life expectancy of the home itself. That puts PV solar in the class of an above-ground pool, not a fixture that belongs in your appraisal.

Super-Luxury Homes

Every appraiser needs to know about these. Thirty years ago, nearly all homes were built like homes, not like five-star hotels. Now, every state has communities with super-luxury homes:

• Over 3,500 square feet of floor with a massive front entrance,
• Marble, quartz and glass everywhere,
• Over 100 built-in light fixtures,
• Cavernous rooms, 18-foot ceilings, no square wall corners,
• More bathrooms than bedrooms,
• Kitchen built-ins appropriate for the kitchen in a high-class restaurant.

These are homes intended to break the norms of residential construction.

That’s why Craftsman appraisal tools step up the game when a super-luxury home is detected. For example, try NationalAppraisal Estimator. Enter a floor area of over 3,500 SF, more than 10 building corners and luxury or semi-luxury class for each of the 10 quality categories. That elevates your appraisal to the super class. You’ll be counting building masses, not building corners. Your cost breakdown for that super-luxury home will be a step above conventional residential construction. Cost totals for finishes, design and engineering will be a much higher proportion of the construction cost.

If your focus is replacement cost rather than appraisal, have a look at Insurance Replacement Estimator. Like all Craftsman valuation tools, it’s backed by over 60 years of construction cost estimating experience.