Appraisal for Split-Foyer with 1 bed upstairs

[nebeno]

All, I'm planning to sell my house soon. I had a couple realtors come by, and was surprised when one of them told me I may have a hard time getting much for it, or even selling it period, because there is only one bedroom upstairs, and appraisers won't count the bedrooms downstairs because it's a split foyer. The basic layout of the house is as follows:

Upstairs: master bed, master bath, 2nd full bath, kitchen, dining, living.
Downstairs: 2 bedrooms, 1 full bath, laundry, rec room.

The house is about 1750 sq ft total. The front side is half above ground, the back is fully above ground. Ceilings are all standard height, the lower level is 100% finished. In generally is has had some major work done, such as new windows and doors, all new flooring, granite countertops, and a new driveway.

When I look at comps in the area (Lusby, MD), I get somewhere in the $170k-$190k range when looking at split foyers or ranches with 3bed/3bath in the area. However, if I look at houses with one bedroom (as that realtor said the appraiser for the buyers loan would have to do), I get around $115k (for much smaller, further away, ranch homes).

So is this true that I will be comp'd with these little houses, and just get a little more for the extra square footage? I've been researching a ton online, and there seem to be opinions everywhere. Is there a way I can get the appraiser to not appraise it so low? There are a number of split foyers with similar size and bed/bath in my neighborhood which have sold, even in the past 90 days. They all have 2 or 3 bedrooms upstairs though. A bit stressed to learn that my house may be worth so little.

Thanks in advance for any help.

 

[CANative]

Some appraisers are not bright enough to discern the Fannie/Freddie policy of above grade and below grade improvements. It's true, we are required to report on the form the above grade improvements and the below grade improvements separately but that doesn't mean we don't value the areas below grade and Fannie/Freddie do not expect us to. It's all a matter of how the market reacts to the floorplan or layout.

Here is the cite from the 2013 Fannie Mae Selling Guide:

B4-1.4-14, Appraisal Report Review: Layout, Floor Plans, and Gross Building and Living Areas (04/01/2009)

Introduction

This topic contains information on layout, floor plans, and gross building and living areas, including:

Overview
Minimum Size
Evaluating Above-Grade Room Count
Below-Grade Areas
Appropriate Above-Grade and Below-Grade Comparisons
Gross Building Area

Overview

Dwellings with unusual layouts, peculiar floor plans, or inadequate equipment or amenities generally have limited market appeal.

A review of the room list and floor plan for the dwelling unit may indicate an unusual layout—such as bedrooms on a level with no bath, or a kitchen on a different level from the dining room.

The appraisal must include appropriate adjustments based on how the subject compares to the comparable sales.

Minimum Size

Fannie Mae does not specify minimum size or living area requirements for properties (with the exception of Manufactured Housing; see Section B5-2.2, Manufactured Housing).

Evaluating Above-Grade Room Count

The most common comparison for one-unit properties is the above-grade gross living area.

Appraisers must be consistent when calculating and reporting finished above-grade room count and square footage for the gross living area above-grade.

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.

For units in condo or co-op projects, the appraiser must use interior perimeter unit dimensions to calculate the gross living area. In all other instances, the appraiser must use the exterior building dimensions per floor to calculate the above-grade gross living area of a property.

The following must be observed when calculating and reporting above-grade room count and square footage for the gross living area:

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.

Below-Grade Areas

Rooms that are not included in the above-grade room count may add substantially to the value of a property—particularly when the quality of the finish is high.

The appraiser must report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the “basement and finished areas below-grade” line in the “sales comparison analysis” grid.

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.

Gross Building Area

Gross building area:

is the total finished area including any interior common areas, such as stairways and hallways of the improvements based on exterior measurements;
is the most common comparison for two- to four-unit properties;
must be consistently developed for the subject property and all comparables used in the appraisal;
must include all finished above-grade and below-grade living areas, counting all interior common areas such as stairways, hallways, storage rooms, etc.;
cannot count exterior common areas such as open stairways.

Fannie Mae will accept the use of other comparisons for two- to four-unit properties (such as the total above-grade and below-grade areas) provided the appraiser:

explains the reasons he or she did not use a gross building area comparison, and
clearly describes the comparisons that were made.

 

[TRESinc]

technically if any portion of a level is below ground it is considered basement and not a part of the above grade living area. this however can be superseded by what is acceptable in the local market. for example in the two counties i cover the local governments recognize the lower level as living area in one county and not in another, however the market reaction is that the partially underground area is accepted as living area.

 

[Thomas Fiehler]

The lower level will typically be counted as basement and the rooms noted as below grade. THat area will not be included in the GLA (Gross Living Area). That really shouldn't matter that much since an appraiser will likely comp it out using other bi-level style houses as comps. Now, an underwriter might want to see 1 or 2 sales with a similar floor plan.

 

[Mike Kennedy]

"There are a number of split foyers with similar size and bed/bath in my neighborhood which have sold, even in the past 90 days. They all have 2 or 3 bedrooms upstairs though."

a. go back 12 months
b. review Active and Contracted Split Listings.
c. "it is what the market (buyers) say it is".

 

[Mike Kennedy]

P.S. If the local Market (Buyers) considers the lower level to be Finished Basement Area which has similar quality, condition, insulation, heating, windows, egress, utilization and similar desirability and pays the same price as First Floor above grade Living Area, then there may be no variance between value; the two levels should be described separately, their individual Finished Square Footage calculated separately etc. If any portion of the Basement is unfinished that would be considered separately from the Finished Area.

Alternatively, if the market indicates a discount for inferior first floor (upper level) bedroom utility then the market has spoken.

Suggest engaging a Local Cert. Appraiser to help you discern what your market says.