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If your house is underwater, can upgrades increase the appraised value regardless of the market?

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March 17 2013 - Five Points
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Risky business you are never going to get 100% value for the upgrades and improvements that you make. Market fluctuations and consumer volatility has builders and homeowners always trying to second guess what is going to be the next hot amenities. 50,000 swimming pool appraises out to be about 7500.-10,000. 
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March 22 2013
Upgrades can increase the appraised - and actual - value of your home, regardless of the market.

- How can houses be built and priced above market value? 

Very easily. Most upgrades will "increase the (value) of your home," and if you factor the cost of those upgrades into your price, you will likely exceed market value.

- Is there anyway to hold the bank or city responsible for steering? in home owners under the assumption the revitalization would be more than what it currently is?

You'd have to consult with an attorney. 

- Bottom line...not all "investments" make money. Maybe not a very sympathetic opinion from your perspective, but it's reality.

It is reality.

Call an attorney, settle the matter once and for all.

All the best,

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March 21 2013
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I'll keep hope alive. Thank you!
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March 21 2013
Yes. But it's not worth it.

You certainly can increase the appraised value with upgrades. Add an extra room. Add a garage. Or if the kitchen is old and dated, upgrade the kitchen.

However, almost no upgrades return close to 100% of the expense. In a few cases, adding a bathroom might. But most other upgrades will return anywhere from 30% to 75% or so. In other words, if you put $30,000 into upgrades, you might (or might not) increase the appraised value by perhaps $10,000-$15,000.

On the other hand, if you sold your house and it was $15,000 underwater, then it'd only cost you $15,000 out of pocket, not the $30,000 you'd have put into upgrades.

A clarification: Although houses can be built and priced above market value, they can't be sold for more than market value. The fact that you paid $x for the house established its market value as that. What's happened is that you bought at the peak, and the price has declined since then.

And a bet: You say: "I don't think our home will ever be worth what we paid for it in this area." I'll bet you $1,000 it will be. Here's the deal: Give me an option on your property at the price you paid. I'll pay you a $1,000 option fee. The option is for 15 years. If the property's value doesn't exceed what you paid for it in 15 years, the $1,000 is yours to keep. If I exercise the option (if the value of the property goes up above the option price, which is the price you paid), the $1,000 is yours to keep, as is the full price you paid when you bought. So you can't lose. I lose $1,000 if the value of the property stays below what you paid for it. (I suspect 99% of investors out there would be willing to make you the same deal.)

Hope that helps.
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March 17 2013
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"Is there anyway to hold the bank or city responsible for leering in home owners under the assumption the revitalization would be more than what it currently is?"

I am not an attorney, but "probably not". Essentially, you bought into a concept - and the concept didn't pan out. Unless you can prove intentional misrepresentation and/or deceit, you simply ended up on the short end of a business transaction.

Bottom line...not all "investments" make money. Maybe not a very sympathetic opinion from your perspective, but it's reality.
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March 17 2013
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The problem we are having is that we purchased our home in 2008 through a community revitalization project that doesn't seem to have been worth the investment. How can houses be built and priced above market value? I don't think our home will ever be worth what we paid for it in this area. In addition to that, the revitalization effort was never complete because of the housing market. Is there anyway to hold the bank or city responsible for leering in home owners under the assumption the revitalization would be more than what it currently is?
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March 17 2013
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Short Version - No.

Longer Version...

I think your question falls into the "never own the most expensive house" category. The reasoning being that your property is "fighting local inertia" to maintain it's value.
 
What you're proposing is similar, trying to sink money into the house to fight the local market/values. In the best-case scenarios, upgrades are rarely a dollar-for-dollar return.

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March 17 2013
It would be unlikely unless you can figure out how to get a $40k pool built for $5k or something like that.
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March 17 2013
 
Related Questions
If your house is underwater, can upgrades increase the appraised value regardless of the market?
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March 22 2013 | 8 answers
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