When an appraiser looks at a home to determine its market value, he’s looking at simple factors such as size, type of construction, number of rooms, neighborhood characteristics, and whether or not it is located near a pig farm. I’m oversimplifying, but not by much. Here’s a typical home appraisal form.
I’m fascinated by what is NOT considered when looking at a home’s value:
– Energy efficiency
– Maintenance needs
– Fire risk
– Flow of space
– Sun orientation
– Kitchen layout
Prior to building our current home, we looked at a lot of nice homes that were for sale. I was amazed that so many high end homes were ugly and unlivable. It was as if there was no correlation between price and quality. Homes with similar square footage were priced about the same, even if one was spectacular and the other was not.
My plan to stimulate the economy is to fix the home appraisal system. Imagine how many homeowners would upgrade their homes if they knew that doing so would increase the eventual sale price. As things stand, why would you make your home more energy efficient, or more livable, or upgrade your kitchen if you might move in a few years?
Perhaps the appraisers of the future would need to be experienced contractors or home designers themselves. And maybe all home appraisals would require three independent opinions to balance the subjectivity. Maybe the appraiser has to stay in the home overnight. No system would be perfect, but if homeowners knew they could get a better return on their home improvement expenses, it would stimulate the economy like crazy.