Alright, you have found the home you would like to get old in. The view is amazing, the people are great, and the asking price was just right. Now as with the average house owners in this position you embark on doing minor alterations or upgrades to your home. A little paint in a few rooms, maybe some wallpaper, new tile in this part of the home, silestone in that room, a ceiling fan here a fixture there. At last you are more than pleased with your now redesigned home.
Time goes by and you choose that you would like to refinance for one reason or another. Let's assume you decided you could get a much better interest rate.You inform your mortgage company about all the improvements in your home and how great it looks, etc. etc. Your mortgage company then tells you about how much value you have to have in your residence and as a result of your substantial LTV they might be able to let you cash out some amount of that home equity. No matter whether you attempt to cash-out equity, your problem shows up when the mortgage company tries to order an home appraisal. The appraiser shows up and looks over your home and heads back to his or her office to develop his report. After reviewing the information he or she see that there is a problem, your home is huge . . . TOO great for your location.
Your home has become what appraisers refer to as "Functionally Obsolescent Due to Super-Adequacy". What this basically means is that the renovations you've made to your home are superior to the homes in your neighborhood so now you are faced with diminishing returns. No homes in your location have been sold for near as much to what your home SHOULD be worth and lacking appropriate comparable documents proof of your property's value is impossible. An appraiser is not going to be able to grant a value to your home any higher than the highest sale price in the location. This might not be terrible for some, but for people looking to cash out or with low LTVs this could very well be a real deal breaker.
If this genuinely worries you then you probably should consider hiring an home appraiser or real estate broker to give you a consultation. Choose an individual that is knowledgeable about your neighborhood because they will know more than anyone how much properties are being sold for and what grade these properties are. Walk your neighborhood and take notice of signs in the front yards. If you begin to write down a repeated person then that is your best bet for a contact. An home appraiser can go beyond that and supply you a future sales amount based on the changes you are considering doing to your home. This will be very helpful if you have purchased a home as an investment.
The point here is to be sure you are aware of your market area which is typically defined as your immediate and surrounding neighborhood and subdivisions up to 1 mile from your home. Know what homes sale for and the type of construction quality or amenities they have before you start major renovations. If you must be Mr. and Mrs. Jones and over do it then conscience of the law of diminishing returns.
About the Author
Working in both San Antonio and Houston TX, R. Chandler Smith is a consummate real estate expert. He maintains http://www.texasappraisalteam.com as well as http://www.cpappraisals.net All work �
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