The other day, I was asked to speak to a group of Caldwell Banker Preferred agents at their sales meeting. It was a lot of fun and some really great appraisal questions were asked. One question jumped out at me and I’d like to share it with you because it comes up all the time.
Is finished basement space considered part of the overall living space of a house?
Good question. My answer to that is…well, it depends on how you look at it. If you’re a real estate agent or even a homeowner, chances are you are going to view that space much differently than an appraiser.
Most agents and homeowners want to play up the positive attributes of a property. So it stands to reason that the finished basement space should be lumped in with the above grade living area. Bigger is better, right? What’s more impressive, a 3,000SF house or a 4,500SF house?
Well, appraisers view this situation a little differently. You see, most appraisers will measure the square footage of a property using the American National Standards Institute’s (ANSI) guidelines. Those guidelines state that any living space located below grade (by 1” or more) is to be considered finished basement space and, as such, is not to be included in the overall Gross Living Area (GLA).
“Whoa, now! That’s crazy” you are probably thinking.
What if it’s a walk out basement? Still finished basement space and is not include in the GLA.
What if it cost $100,000 to finish the basement and there’s a 12 person home theater, wine cellar, exercise room, guest bedroom and a full bath? Surely, that has to be included, right? Nope, still finished basement space and is not include din the GLA.
What if three sides of the basement have exterior walls and only one side is below grade? Sorry, still finished basement space and is not included in the GLA.
So are you saying that finished basements have no value? No, not at all. Finished basements do add value to a home in most cases. It’s just that the space will not be added to or valued the same as the above grade GLA. On an appraisal report there is an entire area dedicated to the value added by a basement and any associated finished space in that basement. The rationale being that most buyers within a given market will not value finished basement space the same as they would value above grade living spaces.
So as an Agent or Seller, what do you do? Well, I recommend describing the two spaces separately in the MLS description. For example, if the house has a combined living area of 5,000SF, explain that 4,000SF is above grade living space and that 1,000SF is in the finished basement.
For a copy of the ANSI Guidelines for measuring a home shoot me an email at mcoyle@coyleappraisals.com
If you need a guest speaker at your next sales meeting, please give us a call. We would welcome to opportunity to speak to your group and field any appraisal related questions you may have. For more information please visit our website at www.TheCoyleGroupLLC.com You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com
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