AVM Perspective: What Can Your Clients do to Increase a Property Value

You may notice that, from time to time, clients will ask you what they can do to increase a property’s value. While the definition of market value as it relates to real estate is clear: the amount a willing buyer is prepared to pay a willing seller for a property - it may seem pretty black and white, but it’s actually not.

There are absolutely things that your clients can do to increase a property’s value. These things will depend on what your client’s future goals are with respect to their property.

Clients who want to sell and want to beef up their list price

Mortgage professional Rebecca Lake summed it up quite tightly in her article https://smartasset.com/personal-finance/5-cheap-and-easy-ways-to-boost-your-homes-value. 

The 5 simplest ways your clients can boost their home’s value:

• Give the kitchen a facelift
• Spruce up the bathroom
• De clutter
• Fresh coat of paint
• Curb appeal/landscaping

Now, the above examples may result in added value for your client if they were listing your home for sale or may result in it selling faster. That said, it doesn’t necessarily mean that it will cause a lender to perceive it as being more valuable.

Many lenders rely upon Automated Valuation Models (AVMs) to validate a property’s value. An AVM is generated using a computer program that analyses public record data, property location, market conditions, real estate characteristics and other factors. In most instances when generating an AVM, the lender will enter the property address which will identify the property, size, location and other key attributes and through comparables or indices, generate a property value. An AVM will not consider minor cosmetic changes in a home when assessing its value.

Appraisals are somewhat more flexible. While most residential appraisals generate the value primarily based on comparable sales, an appraiser may or may not be somewhat swayed by cosmetic improvements to a home. This does not necessarily mean though, even in the case of an appraisal, that the appraiser will bring the property in at the value your client is looking for.

Clients who want to see that changes they have made to their property are guaranteed to be reflected in an appraisal may be required to make other, somewhat more drastic changes. This may include changing characteristics that would impact the comparables used by the appraiser to assess the value of your property:

• Changes that increase square footage
• Finishing a basement
• An additional bathroom
• Additional bedrooms

These types of criteria are considered when comparable sales are generated for an appraisal, because they change the property’s overall characteristics vs. the condition of a characteristic which may or may not be picked up in an appraisal.

The good news is that there are many things your client can do to increase their property value – it all comes down to time and budget. You as a professional can help your clients weigh the time and expense of improvements over possible financial gains in the future.

For more information about the value of an AVM, please contact Purview For Mortgage Brokers today at 1.855.787.8439.