lright, you and your family have spotted the house you and your family would like to grow old in. The community is great, the people are great, and the price was just right. Now like the average home owners in this situation you start doing small alterations to your house. A little paint in a few rooms, maybe some wallpaper, new marble in this part of the house, silestone in that room, a light fixture here a fixture there. Finally you are satisfied with your now improved house.

Some time passes and you make a decision that you wish to refinance for whatever reason. Let's assume you decided you could get a much better interest rate.You inform your mortgage company about all the upgrades in your house and how great it looks, blah blah blah. Your mortgage company goes on to tell you about how much value you have to have in your property and due to your low loan-to-value ratio they might let you cash-out some amount of that home equity. No matter whether you attempt to cash-out equity, your trouble comes when the mortgage company goes to order an house appraisal. The home appraiser comes out and inspects your house and heads back to his office to write up his report. After reviewing the information he see that there is a problem, your house is huge . . . TOO great for your area.

Your residence now becomes what appraisers would call "Functionally Obsolescent Due to Super Adequacy". What this really means is that the renovations you've made to your house are superior to the houses in your area so now you investment is in the negative. None of the residences in your location have been sold for near as much to what your house SHOULD be worth and without appropriate comparable documents proof of your home's value is not possible.. An appraiser is not going to be able to place a value to your house any higher than the highest sale price in the location. This might not be terrible for some, but for investors looking to cash out or with low LTVs this could very well be a real deal killer.

If you are terribly concerned then you should consider hiring an home appraiser or real estate agent to supply you a firm opinion. If you are in the Texas area you can find appraisers online at Texas Appraisal Team and Houston Appraiser . Choose an individual that is experienced within your market area because they will know more than anyone how much homes are being purchased for and what quality these homes are. Walk your market area and search for signs in the yards. If you begin to notice a common person then that is a good call for a contact. An home appraiser can go 1 step further and provide you a future selling amount based on the remodeling you are considering doing to your residence. This should be incredibly helpful if you have bought a house as an investment.

The moral of the story here is to be sure you are aware of your market area which is usually defined as your immediate neighborhood and subdivisions up to 1 mile from your home. Know what residences sale for and the type of construction quality or amenities they have before you start big time renovations. If you must be Mr. and Mrs. Jones and over do it then be well aware of the law of diminishing returns.