Custom Search

Basements and home value

Basements are defined as an area of living that is located below ground level or below grade. Sometimes, you'll have an area that is walk out. If all of the area is at or above ground level, then it will be classified as gross living area (above grade or above ground level) and not a basement. But if any part of the basement is below ground level, it will be included as below ground. Many home owners are confused about this, as they think if the home offers a walk out basement, then this area should be included above ground level. It is not, because the other side of the home or the sides of the home are below ground level. For this reason, it will be included as the basement.

The definition of a basement is important. Listen, appraisers will define the value of your home by determining the basement area and the above grade or the GLA (gross living area). And this could make a big difference in the value of your home. Some appraisers and/or Realtors put the basement area into the living area. This is not correct. Many times appraisers are doing this because they are not able to find comparable sales that bracket the above grade or below grade area of the home. If one appraiser appraises your home like this and the next appraiser appraises your home the correct way, it may result in significant value differences. I also find that Realtors will do this to hide the fact that the home that they are trying to sell is the smallest homes in the area but with this basement, the overall square footage looks better. Of course, this is not correct. Make sure you understand what you are buying.

Finished basement vs. unfinished basement

For newer homes, I've found this to make a significant difference in home value. A finished basement may increase home value up to $50,000 more than other homes in the area that sell for around $200,000. This is because home buyers will recognize the value in a finished basement vs. an unfinished basement. Sometimes, I've found that the home that I'm appraising is one of the first homes to offer a finished basement area. This makes it difficult to find comparable sales with finished basements. In this case, I may have to go outside the market area in order to provide support for finished basements and newer homes.

For older homes, most of the homes offer some type of finished basement in my market area. I used to appraise in cities where basement are limited. The value difference is less significant in older homes. This is usually caused by variations in the market to include differing homes with differing square footage, designs, updating and the age of the homes.

Installing egress/ingress windows in the basement.

Many home owners think that if they add an egress window in the basement and add an additional bedroom in the basement that the value should increase. Many times, this is not the case. This is because most of the emphases in determining the best comparable sales is given to finding homes with similar square footage above the ground (not in the basement). Only after this criterion is satisfied, will the appraiser begin to look at finished area and bedroom count and bathroom count in the basement. Secondly, many appraisers classify the basement as either finished or unfinished, or they will give little value to additional rooms in the basement area. So while a finished basement is desirable and may allow your home to sell faster with a finished basement and a basement with full egress windows, don't count on the value to increase, because sometimes it won't make a difference. So, will finishing the basement increase the value of your home? Keep reading to find the best method when selling, buying or refinancing.

When Selling

Chances are that a finished basement will increase the value of your home, but it will still cost you more to install and finish the basement than the money you'd get if you sold with an unfinished basement. So for this reason, If you are planning to sell your home, your best bet is to sell your home for what the market is willing to pay for a home with no basement improvements, unless you are planning to use the finished basement for at least five years. At this point, there is a good chance that you've gotten some use out of your basement, so even if you lose some money overall, you won't feel quite so bad. Clean the basement. Paint the walls a neutral color, replace the stairs if they are dangerous, Install railing on the stairs and make sure there is not water entering the basement. And oh yes, one good way to add value is to complete the improvements yourself. But whatever you do, if you need a permit, make sure you get a permit.

When refinancing

If you are in the process of refinancing and you've just finished the basement, chances are the basement will not increase the value of your home above the cost to install your basement. One of the best ways to get equity in your home is to do the work yourself, if you are able to and have the skills and tools. This is because one of the biggest costs of installing your home improvements is the expertise and labor it takes to install these types of items. The more you spend on these types of things, the less you'll ultimately be able to put in your bank account when you sell. If you don't have the money to finish your basement, it is what it is. Have the appraiser appraise your home and move on. If you plan on completing your own home improvements, make sure you get the proper permit history. This is one of the biggest mistakes I see home owners making. Don't skip this part.

When buying

If you can find a home in the market that meets your top eight criteria when buying a home, a finished basement may be a bonus. Have your broker look at homes with finished basements and unfinished basements to be sure you are getting value. As long as you are not paying the full cost of the basement finish work, you'll be doing okay. Make sure the basement is dry and they are not running dehumidifiers or something down in the basement with no explanation. Look for cracks in the basement foundation walls. If there are any cracks that you can stuff one nickel in, I'd start to get concerned.

If the home is sloping or there are major cracks, don't waste your time with a home inspector. Just don't buy the home and find one without all of the issues such as water in the basement, or settling problems. Look around for sump pumps. These are pumps in the basement to remove water from the basement area. Sometimes, they are in the closets, other times they are located in the utility room. In either case, the better choice would be to walk to a different home if they have a sump pump. This means they may have a water problem. The most important part about buying a home is not to buy someone's problem.

You are welcome to link to any of my articles. Please provide a live link. Please do not copy my articles word for word and put them on your site. Thank you.