Many times, homeowners look at the size of their home and assume that all living space is equally valuable on a price per square footage basis. That’s not always the case.
Expansions: Distinguishing Square Footage
In Silicon Valley, we frequently see tract neighborhoods of smaller houses, say 1,000 to 1,500 SF, in which additions have been made. Sometimes it’s an unattractive “pop-up” or “box on the top” which doesn’t match the home’s design or the look of the neighborhood. Other times it’s a tasteful expansion which blends seamlessly into the home. So how differently will these be priced?
Most of the time, the expansion will not be valued as highly as original square footage. If it’s a very small addition, such as a half bathroom or extending the facade a few feet to create a larger foyer, this may not be the case, particularly if this leaves the structure’s size still in line with the neighborhood. But in general, the added living space will be valued by most home buyers (and appraisers) on a lesser scale.
If the addition was done without permits and finals, home buyers may still find it attractive, but appraisers will most likely count the value as zero.
The type of room will also impact how it is valued. Bathrooms and kitchens are more expensive and therefore have the potential to be valued more highly than bedrooms or family rooms or other space that does not involve plumbing or appliances.
On the other hand, if the expansion encloses a back porch, darkening the kitchen or living room within, it could hurt the value if not well done. Similarly, garage conversions remove the functional space of a garage which is highly valued by buyers and does not usually have a great ROI in resale.
Getting Value Out of Additions
Many home owners choose to expand rather than move, so how can you make your added square footage a good investment?
The value difference between original and added SqFt depends on many things, such as whether the house is now overbuilt for the neighborhood, what the market conditions at the time, the quality of construction, etc.
Several times in my career I’ve seen homes which were added onto multiple times, such that the floorplan becomes a maze and it ends up feeling like a bit of a Winchester House. At the other extreme, there are remodels which are so comprehensive that the whole house is nearly rebuilt and you can’t tell what’s original and what’s new. In that case, there could be no discount for the addition at all.
Here are a few basic questions to ask when considering the value of an expansion:
- Does it match the design of the house overall?
- Does it blend in with the immediate neighbors and the overall neighborhood?
- How does it impact the “flow” of the house? Does it feel intuitive?
- Does it take away from another space? Examples:
- Garage conversion and parking / storage
- Usable yard space
- Enclose and darken rooms that had exterior walls and windows prior to expansion
- What does it contribute to the home? Adding a half bath to a 3 bed 1 bath home will add more value than adding a half bath to a 3 bed 3 bath home.
- For attached or detached ADUs, how will it impact privacy of the main house and the unit?
Related Reading:
Assessed Property Value vs. Market Value of Silicon Valley Real Estate
Sometimes the List Price Isn’t the Expected Sales Price, So Run Comps!
