The Uniqueness of Real Estate
Dictonary.com defines “capricious” as 1. subject to, led by, or indicative of caprice or whim; erratic. 2. Obsolete, fanciful or witty.
One of the reasons I like working as a real estate valuation specialist is the fact that all real estate is unique. I’ve estimated values for 18th century historic homes and a modern home with more than 10,000 square feet of living area where you could look through portholes in the underground garage and see into the Olympic-sized swimming pool. Some of these homes, however, are a challenge for everyone in the real estate process from listing agents to buyers, loan officers, and appraisers.
The word “capricious” is used in real estate in rare instances (thankfully), and mostly by real estate appraisers, to describe a component or feature of a property (accessory building, building, outbuilding, or structure) that has “capricious value.” Words like whim, erratic, and witty are probably too outlandish when thinking of real estate, but here’s further background how this term came about.
My own definition of capricious value is where owners improve their properties far beyond that of competing properties in their local market. Capricious value is appreciated by the owner and is specific to his or her tastes but is not desirable to typical buyers to the point that they are willing to pay more for it. A better word, especially for written reports, word be an “over-improvement” that is then explained in detail by the appraiser.
One of the best examples of capricious value that I have seen were custom made plaster alcoves for one-of-a-kind framed painting sunken into the interior walls of a 10,000 square foot-plus residence. The homeowner contested the property assessment in the year after the home was built (and fully assessed) because the local assessor had used the contract construction cost of the home to determine the assessed value. In hindsight the assessor should have identified the unusual costs associated with the actual construction cost that would have resulted in a replacement cost estimate.
Some over-improvements might enable the homeowner to recapture some of the cost. Although all real estate markets are local, some over-improvements may only increase the marketability of the property.
What are some examples of over-improvements that you have worked with?
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