When it comes to increasing the value of a property, understanding the difference between an appraisal and an assessment is key. Square footage discrepancies between the two can lead to inaccurate valuations and missed opportunities for increasing a property's value.

Lets start with the basics..

What is an Appraisal in California?

In California, an appraisal is an evaluation of a property's market value conducted by a licensed appraiser. The appraiser considers several factors, such as the property's location, size, condition, and unique features to determine its current value. As a developer, you can use this information to identify opportunities to increase the value of the property through renovations, upgrades, or additions.

What is an Assessment?

In California, an assessment is a determination of a property's value made by the county assessor for the purpose of calculating property taxes. Assessments take into account factors such as the location, size, and condition of the property. It's important to note that assessments are not the same as appraisals and are not conducted to determine the market value of a property.

Why Square Footage Discrepancies Can Occur:

One area where discrepancies can occur between an appraisal and an assessment in California is the measurement of a property's square footage. Appraisers and assessors may use different methods of measurement, resulting in different square footage measurements. This can lead to confusion and discrepancies in the property's valuation, which can impact a developer's ability to identify and pursue opportunities for increasing the property's value.

How to Avoid Square Footage Discrepancies:

To avoid square footage discrepancies between an appraisal and an assessment, it's essential to ensure that both measurements are taken in the same way-. This means using the same measuring standard and taking into account the same areas of the property. Additionally, it's important to double-check both the appraisal and assessment to ensure that the square footage measurements are accurate.

Un-permitted Additions Can Cause Square Footage Discrepancies:

One reason for a square footage discrepancy in an appraisal is un-permitted additions to the property. The county assessor may not be aware of these additions due to outdated records or a seller's failure to obtain permits. While this may keep property taxes low for the seller, it could affect the property's value when selling it.

If a building permit wasn't obtained for an addition, the assessor wouldn't consider it in the assessment, resulting in a smaller recorded size. This may also affect the appraisal's square footage and could raise concerns about the quality of undocumented work.

So How Do You Value Additional & Non-Permitted Square Footage?

The challenge; the square footage obviously still exists, is likely usable and has an inherent value associated with it. Valuing that square footage is a slippery slope when it comes to list price, because including it in the asking price will more than likely show a higher-than-market price per square foot to the untrained eye, and might deter buyers before they even attend the open house.

Marketing wise; I've always found it best to market the additional space as 'Bonus Space', and have buyers decide the value in their offer price. I've had success staging many additional spaces as Man-Caves, She-Shed's and built-out garage spaces.

The most notable; 4620 Virginia Ave in Oakland. We spent less than $5k to drywall and frame a bonus space underneath the property, then staged it as an additional suite/ADU with it's own bathroom. Because the space was so obviously valuable to an end-user, buyer's reflected their idea of value in their offers, leading to a highly competitive offer situation and a neighborhood record $/foot sale.

The market ultimately dictates the market value of a property, not sellers, the listing agent, or the list price.

If you have any questions, text me.

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