Chances to recoup cost of building pool when selling home good

Q: Our current home does not have a pool. We have looked at resales, foreclosures and new homes that offer pools as incentives. However, with the housing market at such a volatile state, we thought about staying in this home and adding a pool to the backyard. An associate at work said we would only recoup 50 percent of our investment in the pool. Is that true?

A: The 50-percent rule with regard to the value of a residential pool is one that has been disputed for years. And, depending on whom you query — a real estate broker, a lender, a pool builder or the pool owner — you will more than likely have a disagreement on its validity.

The commerce tasked with the responsibility of determining the value of property is the appraisal industry. Most commonly appointed by the lender, an appraiser is an impartial individual (company) trained to place an assessment on property and inventory. The lender will then determine a loan based on the assessment.

I contacted one of the state’s most respected appraisers, R. Scott Dugan, to provide some insight into this question. His immediate response was, "It is one of the biggest misconceptions in the residential real estate market."

Dugan is the owner and president of R. Scott Dugan Appraisal Co. Inc. Armed with a degree from the University of Las Vegas, Nevada, and the designation of senior residential appraiser (SRA) from the Appraisal Institute, Dugan has been appraising the Las Vegas market since 1969.

His company appraises more than 5,000 homes per year, 20 percent or more with pools and spas in the backyard.

Dugan noted that homes valued at $500,000 and up have a higher percent of pools, upwards of 40 percent to 50 percent.

As a general rule, if the contract price is within 10 percent to 15 percent of the value of the home, Dugan is confident in giving the pool feature a full appraisal value.

If the contract price is more than 15 percent, then he would evaluate other contributory factors such as the outdoor living area, a built-in kitchen and special water features, all of which add value to the appraisal.

"It is not uncommon in the Las Vegas Valley to appraise backyards for $100,000 or more," Dugan said.

Admittedly, there are appraisers that may not subscribe to this same theory. Dugan said, "There are guidelines for appraisers to follow; it is not totally subjective. It comes down to experience and training."

Most lenders have an approved list of appraisers that are assigned on a rotating basis without input from the homeowner.

Realistically, if a homeowner purchases a home for $300,000 and installs a $40,000 pool, when he goes to sell his house, at minimum he wants to recoup his investment of $340,000.

Can a homeownere over-improve? Yes, there are many homeowners that exceed the suggested 15 percent mark. The over-improvement can be justified by the value of the lifestyle the family lives. On average, homeowners will reside in a home for five to seven years, and for some the lifestyle value a pool adds to their home is more important than the investment value.

Before building a pool, Dugan recommends talking with the appraiser during the appraisal process, as well as providing valid, detailed documents for all home improvements, including the backyard and pool feature.

"If your concern is strictly resale, do not over-improve," Dugan said.

But, if you are considering upgrades and want to make certain you’re increasing the marketability of your home, go to www.appraisalinstitute.com. There, you will find consumer tips for remodeling your home.

So, fear not. Install a pool, enjoy it and when the time comes to sell, do some research. Only then will you have a better chance of obtaining a full value on your investment.

Joe Vassallo is the president of Paragon Pools, as well as a member of the Association of Pool and Spa Professionals, a certified building professional and a representative of the APSP National Builders Council, Region XI. Send questions or suggestions for column ideas regarding pools and spas to him at jvassallo@paragonpools.net or 251-0500.