Suppose you own a castle
on the flats and your brother owns one high atop a hill that features amazing,
unobstructed views. Aside from location, the two castles are identical. Which
one has the higher resale value?
If you guessed that it's
the hilltop castle, you are correct. When valuing two similar pieces of
property location is king and everything else is secondary.
While it's easy to say that
the home with the view is "worth more" than the home without one,
there are no rules on how much value the amenity adds.
Agents and Appraisers
Real estate professionals
are at odds over this. Some claim that there is no premium for a view while
others say that a view can add up to 15 percent to the value of the home over
others lacking the amenity.
Researchers Mauricio
Rodriguez and C.F. Sirmans reject the notion that a view has no impact on home
value. Their study, published by Texas Christian University, shows that a view
adds between 5 to 8 percent to the market value of a home.
Professional
appraisers—those folks that tell your lender how much your home is worth—are
given vague guidance by the Appraisal Institute that when valuing a property
they must consider the view. What the institute doesn't tell them, however, is
how to arrive at that value.
Then there is the fact
that a view may be distasteful. An auto dismantler or a rundown apartment
building out of the dining room window, for instance, will drag down the value
of a property. Either way, views are challenging to measure, whether that view
is good or bad.
View Orientation
Is what you're seeing out
the window located close or far away? Patrick Brown and Beverly McCabe, in
a report prepared for the American Appraisal Institute, claim that a close-up
view is worth more than a faraway view. For instance, the Golden Gate Bridge
right outside your window is worth more than if the bridge were located several
miles away.
The pair also finds,
though, "In some contradiction, a near view of a prized view object is
preferred over a far view, while the ability to see a far distance is prized
over a vista that is foreshortened."
Then there is the
orientation of the view from within the home. A view from the back of a house
influences the home's value more than a view from the front, according to the
pair.
"What really counts
is the (ground level) view from the back, because that's where people
live," Ernest V. Siracusa, a Southern California real estate market
analyst, tells MSN.com.
This is because almost no
one spends much time in the front of a house; most of the "living"
goes on at the rear. Siracusa claims that he would give a view from the front
of the home "zero view premium."
The additional value is
added if the view is from areas of the home that are used the most, such as the
master bedroom, dining room and kitchen.
The Worth of a View
After spending years
studying the subject of the value of a view in newly constructed homes,
Siracusa has come up with a range to measure the value added for different
types of views and view orientations. It runs from 1 percent to 2.5 percent for
a home overlooking open space to 15 to 20 percent for a water view, as long as
the view is unobstructed.
He goes on to point out
that if that view is of the ocean, the home may command up to 30 percent more
than similar homes without the view.
That's helpful
information for builders who are attempting to put a price on new construction,
but what about older, existing homes?
Earl Benson, Western
Washington University marketing and finance professor, may have hit on the
answer. He tells Marilyn Lewis of MSN Real Estate that his studies of
Bellingham, Wash. assessor's records combined with his own calculations showed
that a home in that area with a water view would sell for $117,600 more than a
home that lacks that view.
Put that house on the
shore of either the ocean or a lake, and it would command a whopping $253,280
more at close of escrow than if it were located somewhere less attractive.
While the value of a
residential view fluctuates depending on orientation, the subject of the view,
and the amount of obstruction, studies seem to show that the amenity does add
to the resale value of a home.
If you're fortunate
enough to live in a room with a view, ensure that your real estate agent
factors it into the calculations she performs to determine market value.
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