Apprasial of basement

[livelife2]

Bought a home in 2005 and the appraisal was for 2800 square feet. I just had it reappraised so I could refi from a 30 to 15 year loan (no money out, etc, just a simple lower rate and fewer years).

The new appraisal gave the home a 30% less value because they stated that a basement cannot be used as part of an appraisal, that his was an ANSI standard. So the new appraisal was based on 1400 square feet instead of the appraisal I received in 2005 for 2800 square feet.

My home is two stories where the basement floor is about 75% under ground level (was built this was as an energy saver (house is in Tucson AZ). All the rooms on the first level have windows to the outside. This home was built as a two story, ie the basement was NOT finished afterwards, but part of the building. My tax bill is based on 2800 square feet.

So my question is, can this first floor/basement ever be used for appraisal value?

thanks

 

[ctapraser]

Bought a home in 2005 and the appraisal was for 2800 square feet. I just had it reappraised so I could refi from a 30 to 15 year loan (no money out, etc, just a simple lower rate and fewer years).

The new appraisal gave the home a 30% less value because they stated that a basement cannot be used as part of an appraisal, that his was an ANSI standard. So the new appraisal was based on 1400 square feet instead of the appraisal I received in 2005 for 2800 square feet.

My home is two stories where the basement floor is about 75% under ground level (was built this was as an energy saver (house is in Tucson AZ). All the rooms on the first level have windows to the outside. This home was built as a two story, ie the basement was NOT finished afterwards, but part of the building. My tax bill is based on 2800 square feet.

So my question is, can this first floor/basement ever be used for appraisal value?

thanks

Short answer, no basements should not be included in the GLA or room count, they are however included in the "appraisal". It would seem your first appraisal may be incorrect. Sometimes the basement "lower level" can be included but it's rare and the appraiser needs to be very clear and have comparables that are similar.

FWIW, 30% from 2005 (in some areas of my market) is not that bad!!!

 

[Lee Lansford]

...

So my question is, can this first floor/basement ever be used for appraisal value?

thanks

The lower-level obviously contributes to the Market Value of your property though it does not fit the definition of Gross Living Area.

 

[hastalavista]

Sometimes the basement "lower level" can be included but it's rare and the appraiser needs to be very clear and have comparables that are similar.

It may be rare or common, depending on the configuration of the so-called "basement" area, and the market/region.

Original Poster: I'm not disagreeing with CT; rather, he is absolutely right, but this issue is very market specific.

In my markets (East Bay/San Francisco), homes have finished space that in other parts of the country would be categorized as "basements" (because they are partially below-grade), but in my markets no one would even think of them as basements (and the market values them as what we appraisers call "GLA" or Gross Living Area).

So, the characterization is a market/region thing.
Regardless of how it is characterized (living area or basement), the appraisal needs to analyze and value it based on how the market reacts to it.

So, if two appraisers appraised your home, one called the space "basement", the other "living area", while we could argue about which one categorized the space correctly, if they analyzed how the market reacted to the space correctly, the valuations should be similar.

Good luck!

 

[Mike Kennedy]

Bought a home in 2005 and the appraisal was for 2800 square feet. I just had it reappraised so I could refi from a 30 to 15 year loan (no money out, etc, just a simple lower rate and fewer years).

The new appraisal gave the home a 30% less value because they stated that a basement cannot be used as part of an appraisal, that his was an ANSI standard. So the new appraisal was based on 1400 square feet instead of the appraisal I received in 2005 for 2800 square feet.

My home is two stories where the basement floor is about 75% under ground level (was built this was as an energy saver (house is in Tucson AZ). All the rooms on the first level have windows to the outside. This home was built as a two story, ie the basement was NOT finished afterwards, but part of the building. My tax bill is based on 2800 square feet.

So my question is, can this first floor/basement ever be used for appraisal value?

thanks

City of Tucson
Adopted Building Codes
ACCESSIBILITY CODES
CODE ADOPTED RESOLUTION/ ORDINANCE #
1998 ANSI A117.1 October 17, 2007 O # 10463
2003 ANSI A117.1
ADOPTED BY REFERENCE
IN 2006 IBC June 12, 2007 O # 10417


"ANSI Z-765
Reporting of Above- and Below-Grade Areas
No statement of a house’s finished square footage can be made without the clear and separate distinction of above-grade areas and below-grade areas.

Above- and Below-Grade Finished Areas
The above-grade finished square footage of a house is the sum of finished areas on levels that are entirely above grade. The below-grade finished square footage of a house is the sum of finished areas on levels that are wholly or partly below grade. This standard makes a clear delineation between above-grade square footage and below-grade square footage; no statement of a house’s square footage can be made without that clear and separate distinction."

OP should contact the Muni Building Inspector and ascertain whether or not the Muni utilizes ANSI or the IBC (International Building Code). If the IBC, ask to review the pertinent section on Basements.

Utilization of ANSI - is entirely optional. The Appraiser's reliance upon ANSI may or may not have been germane to the subject property depending on which Measurement Guidelines the Municipal utilized - when the dwelling was built, and when it was recently appraised.

Assuming the local market (buyers) typically (based on analysis of competitive local sales with similar configuration and layout) pay the same purchase price rate for above AND below grade areas - though segregated - the above grade GLA and below grade finished basement MAY yield similar Market Value.

 

[Lee Lansford]

...

So, the characterization is a market/region thing.
Regardless of how it is characterized (living area or basement), the appraisal needs to analyze and value it based on how the market reacts to it.

So, if two appraisers appraised your home, one called the space "basement", the other "living area", while we could argue about which one categorized the space correctly, if they analyzed how the market reacted to the space correctly, the valuations should be similar.

Good luck!

Yep, yessireebob.

 

[OHioCertRes]

The Fannie Mae Selling Guide (B4-1.4-14, Appraisal Report Review: Layout, Floor Plans,and Gross Building and Living Areas) states the following:

A level is considered below-grade if any portion of it is below-grade regardless of the quality of its finish or the window area of any room. A walk-out basement with finished rooms would not be included in the above-grade room count. Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. Garages and basements, including those that are partially above-grade, must not be included in the above-grade room count.

https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel120110.pdf

 

[hastalavista]

The Fannie Mae Selling Guide (B4-1.4-14, Appraisal Report Review: Layout, Floor Plans,and Gross Building and Living Areas) states the following:

A level is considered below-grade if any portion of it is below-grade regardless of the quality of its finish or the window area of any room. A walk-out basement with finished rooms would not be included in the above-grade room count. Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. Garages and basements, including those that are partially above-grade, must not be included in the above-grade room count.

https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel120110.pdf

Here's part of the rest of that section (my bold):

Appropriate Above-Grade and Below-Grade Comparisons
To ensure consistency in the sales comparison analysis, appraisers must compare above-grade areas to above-grade areas and below-grade areas to below-grade areas.
Appraisers may deviate from this approach if the style of the subject property or any of the comparables does not lend itself to such comparisons.However, in such instances, the appraiser must explain the reason for the deviation and clearly describe the comparisons that were made.

Trust me: an area that is counted as "below grade" in one part of the country can be and is counted as "living area" in others.
:new_smile-l:

 

[Doug DeMars]

Hey Denis...you beat me to it!

Everytime I run into this situation, I include these comments:

As noted in the Fannie Mae Single Family / 2002 selling Guide / Part XI: Property and Appraisal Guidelines (06/30/02) / XI, Chapter 4: Reviewing the Appraisal Report (06/30/02) / XI, 405: Improvements Analysis (06/30/02) / XI, 405.06: Gross Living Area (06/30/02)

"...the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments...in the "sales comparison analysis" grid....The appraiser may deviate from this approach if the style of the subject property or any of the comparables does not lend itself to such comparisons. However, in such instances, he or she must explain the reason for the deviation and clearly describe the comparisons that were made."

 

[hastalavista]

Hey Denis...you beat me to it!

Yeah, I find it kind of funny when these conversations come up regarding "basements".
Obviously, it is an important and appropriate element of comparison in many parts of the country, and I respect the appraisers in those markets who have to be able to differentiate the area, analyze the differences, and support the adjustments.

I'm just glad I don't have to do it (I've appraised maybe 20-25 homes with what anyone would call a fully functional and finished "basement" used as an extension of the house, finished in the same (or better) quality/condition as the "above grade" living area. But I've probably appraised more than a 1,000 homes with what many east of the Rockies would call a basement, but in my markets it is GLA).

:new_smile-l:

(Doug: BTW, REAA is teaching the USPAP class in Pleasanton on January 15th, 2015. Continental breakfast, lunch, and the USPAP Book, all for $180 non-members/$125 for members. The greatest deal of all time! :new_smile-l.