Appraisal with both above and below grade elements

[CGinMN]

How are you getting 17%? Post a screenshot of the sales comparison grid.

 

[Surf Cat]

The home was never listed. My Dad owned the home for 60 years and one of the neighbors saw us getting ready to sell and put in an offer. It is a FSBO sale.

Did you have a reputable, local realtor do a CMA on the property?

Our one comp for the below grade space was from three years ago and was a flip.

Did this sale have a finished basement similar to its above grade like yours?

Not being typical for the area (basements) makes it tough. There really is no set percentage or formula. It really depends on how the market values finished basements.

Does the buyer want you to lower the sale price based on the appraisal which you feel is not adequate?

Is the appraised value similar to the most recent sales in your market area without basements?

Like CGinMN suggested, post a screenshot of the grid.

 

[sputnam]

Hello everyone! I am selling my Father's home in Arizona and it has both above and below grade living spaces. It was built as a split level home with the same finishes in both areas. It is served by the same AC/heat unit with installed duct work and has large (3'x6') windows in each room and a door leading to the outside from the basement level. The water table in Tucson is at 180 feet. We understand that the ANSI requirements regarding below/above grade in Arizona require the below grade space to be rated differently. There is 1220 feet upstairs and 1227 in the basement area, so we are not talking about a small space. My question is, is there a formula or standard that is applied to the appraisal of the below grade portion? Our below grade space is appraised at 17% of our above grade space and that seems ridiculously low. Can anyone shed some light on this for me? The sale of our home is in jeopardy over this issue and I am trying everything I can to make it work. Thanks for any input that would be helpful.

Not exactly. ANSI is about how the size of the dwelling is described. It doesn't change what is there. It's simply a standard way of measuring and calculating the size of various areas of the structure. The short definition of Gross Living Area (GLA) has been 'finished, heated, and above the ground' for at least 40 years. That hasn't changed.

The market in the area determines whether areas that are below ground are valued differently than those that are above ground. Nothing else.

 

[CGinMN]

A 2000sf ranch that is all above grade and on one level is not the same as a 2000sf ranch where half the living area is below grade on a different level. I would expect to see some significant discount for the below grade area. It depends on the utility of the area, light/windows, walkout, etc. Even if it’s very nice, still some discount because one level living is generally preferable.

I’ve seen it happen where basements aren’t common (SWUS) that seller price their homes using price per square foot of all above grade home. This doesn’t work but then they get a contract and are upset with the appraiser for ruining the transaction.

 

[KHS445]

First thing I would do is have the lender request a "redetermination of value", which it sounds like you have already done. I would also request that the lender ask the appraiser to "show their work" as to how they determined the contributory value of the finished lower level. Because you are not the lender's customer, you may have to have the buyer make these requests.

Please keep in mind that for business reasons, I do not complete residential appraisals for secondary market transactions. However, I do many odd and higher-end residential appraisals, and I do encounter situations similar to yours where the lower level is finished and may include direct exterior ingress and egress. Also, due to heavy frost, local code requires that foundations be at least 48" deep, so over the years, most construction digs down another 48" to provide a full-height basement. Probably 75% of the homes in this area have a basement, with 20% having a crawl space and maybe 5% being built on a slab. Most homes are built on a slab because of a high-water table, such as being near an inland lake, with the foundation still being built below the frost line and then backfilled.

My usual approach is to review the Marshall & Swift Construction Cost Guide for single-family dwellings. Then, based on the type and quality of construction, I will estimate the cost of construction using the above-grade finishes as my guide, and then look at the estimated cost for constructing and finishing a basement based on the finishes present. Presently, the per square foot cost for a dwelling featuring good quality construction above grade with similar finishes below grade indicates the below grade cost to be approximately 82% of the above grade costs. For comparison purposes, the cost of an unfinished basement is approximately 18% of good-quality above-grade costs. I will then consider making adjustments for things like interior and exterior ingress and egress, functionality, whether it is an over improvement compared to the market, the results of my comparable search, etc.

This may not be the perfect methodology, but the beginning assumption is based on industry-reported construction costs with some tweaks being made for more localized market-supported adjustments. The better and more supportive the localized information is, the more I will rely on that when considering the level of my adjustments.

 

[Kayla]

The appraiser came back today and adjusted the value to the sales price. It was apparently some type of error. As the seller I did not get a copy of the updated appraisal, just that the value was adjusted to the current sales price. I appreciate everyone who responded to this thread.

 

[Lycabull]

Our appraisal has been done and it came in about $12,000 under value.

Who was the client of the report? Was it your appraisal or a lender's?

 

[Dublin ohio]

Who was the client of the report? Was it your appraisal or a lender's?

The appraiser came back today and adjusted the value to the sales price. It was apparently some type of error. As the seller I did not get a copy of the updated appraisal, just that the value was adjusted to the current sales price. I appreciate everyone who responded to this thread.