I spent $25,000, and my pool is worth how much!?

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I spent $25,000, and my pool is worth how much!? By Tim Andersen

Sometime back a Realtor acquaintance called to ask how much to adjust for a swimming pool. The question implied that we appraisers have access to some kind of secret “book” in which we maintain the dollar amounts of our various adjustments. Would that this were true! I explained to the Realtor© we had to extract our adjustments from market data. The parting comment was something along the lines of, “Well, that would take too long!” And our conversation ended. So, let’s talk about that.

It’s not particularly difficult to calculate a swimming pool adjustment. This can be done by paired-sales analysis or by regression analysis. While I prefer regression analysis, both produce perfectly acceptable results. The results are acceptable not because one or the other is “right” or “correct”. Rather, they are acceptable because the adjustment comes from the market, which must be the source of all of an appraiser’s adjustments. So let’s consider a hypothetical paired-sales analysis to extract a swimming pool adjustment from the market.

Take 10 sales more-or-less comparable with the subject that have swimming pools, and then compare those with 10 sales more-or-less comparable with the subject that do not have swimming pools. You’ll probably end up with 10 indications of the contributory value of a swimming pool. Next, arrange the differences from low to high. Take a look at this range. If there are one or two numbers that are obviously outliers, delete them. Now consider this range to determine if there is a central tendency. For example, is there a contributory value indication that repeats itself? This would be a modal value. Is there a range of contributory values that repeats itself? If so, somewhere within this range is the likely contributory value of the swimming pool.

Look at the average and median differences as well. Frankly, you probably want to avoid the average contributory value because of the inherent differences there are in swimming pools. An average weights all of the numbers in the array the same. Since the market likely does not do this, it’s best to avoid it. The median value represents the absolute middle of the range, but is not affected by extremes or outliers.

You started out with a rather wide range of contributory values, but via the above analyses you have likely narrowed it. This narrowing process is exactly what you’re looking for from paired-sales analysis.

Suppose that your analyses indicated a reasonable range from $10,000-$15,000. Out of this range you are going to choose your adjustment (even though a range is far more indicative of the market’s thinking). Also suppose that the swimming pool at your subject is relatively “plain vanilla”. For this reason, you would probably go with the low end of the range, say $10,000. On the other hand, were your subject swimming pool rather ornate, large, and/or came with an overly large patio and pool deck area, you would probably go with the higher end of the range (although, that would be your judgment call).

The point here is that you did not “guess” at the contributory value of that pool, etc. You did not try to cost out a pool as if new and then apply a depreciation factor. You did not apply a “rule-of-thumb” to determine your adjustment. Rather, you went to the market and, via analyses of the available sales within a market comparable to that of the subject, teased out of it a reasonable approximation of the contributory value of the swimming pool.

Please understand that the best you can do is approximate the contributory value of the swimming pool. This is because individual buyers and sellers react to such an amenity differently. As a result, your adjustment of, say, $10,000 does not mean the market sees the contributory value of a pool to be merely $10,000. Via your analyses, you demonstrated that the market sees a range of contributory values. From that range you, the appraisal expert, concluded that an adjustment of $10,000 approximated the contributory value of the swimming pool at your subject.

In other words, you supported your conclusion. This is all a client can ask for. Your client may not agree with your conclusion. However, your client must agree that your adjustment is based on logic, reasoning, and market evidence. That’s really the best you can do.

So, the point here is, while you may not be able to prove exactly how much a swimming pool contributes to the market value of a specific property, you can show the range of that value. Then, from it, you choose an individual number, even though that range makes more sense in the market. It’s your opinion that the swimming pool at the subject contributed $10,000 to overall value. You base your opinion on market data, therefore your opinion is well-formed. As such, you have formed an independent, impartial, objective, and credible opinion of the contributory value of that particular amenity. That’s what appraisers do.

9 replies
  1. Duke
    Duke says:

    When I was in Real Estate school, we were told that in an appraisal we give NOTHING for a swimming pool. Swimming pools are not for everyone. They appeal to only a specific taste. For this reason, if there are two properties, side by side, that are IDENTICAL in EVERY way, except one has a pool and the other does not, the value of the two homes is EXACTLY the same. Buyers will pay the same amount for a home without a pool as they would an identical home with a pool. It is a matter of buyer taste and preference. Therefore, the pool has $0 value.

    Reply
    • John
      John says:

      Wow, I hope they were referring to non-working pools or something out of the ordinary. Don’t make sense. If pools were not to be given any value, lenders, Fannie, FHA, etc would not even let appraiser’s contribute value. In parts of the country where its hot several months a year, the typical inground pool typically does add 10-15k and more like 15k recently in this seller’s market. See, there has been a myth, at least since the 1970’s, maybe much earlier, that a pool does not add value and people still think that today that I run into. Like much in the news today, just because its printed or said, doesn’t make it close to being 100% the truth. Anyone teaching that in a real estate school should be corrected or let go for incompetence IMO. Pools not getting value is the exception in many states, not the rule, and is determined by the market or lender or govt agency and nothing else. I believe USDA deducts the contributory appraisal value for a pool for its loans, but they are still to be given value in the appraisal.

      Reply
  2. Angela
    Angela says:

    We have been shopping for homes in southwest Florida. I am consistently seeing homes in our price range (upper 200’s to mid 300’s listed (and everything is selling at or above list within days) for 10-15% more for similar sized homes. The one we are under contract for, with the same floor plan (ours has a mod) well done and gorgeous with a pool cage, paver patio, L shaped concrete… went for 12% more than we got ours. I saved the pictures for what ours “could” be. I was just researching. Florida in summer, a dip in the pool sounds lovely. People heat them in winter. It’s a year round thing. It’s just ridiculous that someone would say that they add zero value. It will limit your buyer pool numbers in some cases and expand them in others. I would consider it a wash. And yes, I was being goofy and snarky with those comments. I am not an appraiser, but I went through the training years ago. Some of what the appraisers give on the adjustments doesn’t seem in alignment with reality at times. For example $1200 for a $15000 deck in Indiana or $5000 for a finished basement that adds a thousand square feet of useable living space. I don’t know. You do what you can, but I don’t know that it reflects how people actually think or buy. Supply and demand plays more of a role. We just wanted ANY house in our price range that would “work” for us in this market. I have never seen anything like it… a dip in a pool sounds lovely about now…. :)

    Reply
  3. Steut Whiss
    Steut Whiss says:

    The pool appraisal article on the blogger’s website is educational for pool owners as well as prospective buyers. The successful approach their personal experiences with pool appraisals and discusses the factors that go into determining a pool’s worth in today’s real estate market. I liked that the article had a more personal tone, and I picked up a lot of useful information from reading it.

    Reply
  4. Henry Wilson
    Henry Wilson says:

    The blog post about pool appraisals is interesting for anyone who owns a pool or is thinking about buying a home with a pool. The author talks about how pools are valued in the real estate market and shares their own experiences with pool appraisals. I learned a lot from this post, and I like the author’s personal stories.

    Reply
  5. PoolPac
    PoolPac says:

    This article does a fantastic job of explaining how much a pool can increase your home’s value. It’s fascinating to observe the effect a pool has on a home’s market worth. The value of a pool depends on several variables, including the pool’s size, its design, and its location on the property. If you’re thinking about installing a pool and want to know how it will impact the value of your home, this article is for you.

    Reply

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