Basement Adjustments For Cost?

[NachoPerito]

I don't have a problem with that method as long as it is depreciated cost.

Paired sales could be used to determine an adjustment for finished basement versus unfinished basement, but so much depends on the quality of finish that it becomes very difficult.

 

[Digger88]

I tried to figure out how they came up with the adjustment. Adjustments range from ~$8/SF to about $22/SF. You don't tell us the quality of the finish but a very basic finish with no plumbing is about $25/SF and a typical finish basement in my market is going to be $30-$40/SF to finish.

You being in the land of vast neighborhoods have an advantage over those that do not and it should be easy to derive matched pairs for basements. I typically pull basement adjustments from subdivisions and have found $10-$12/SF contributory value for a finished basement. The easiest way to derive them is looking at overall $/SF sale price. In the land of cookie cutter houses you should easily be able to pull 30 sales of no basement finish and 30 sales of basement finish and compare the homes on sale prices per SF.

but you dont agree with the use of builder cost to determine the adjustments dollar for dollar do you? hes not adjusting for finished sf, hes adjusting for difference in finished builder costs for finished area.

 

[Digger88]

I don't have a problem with that method as long as it is depreciated cost.

Paired sales could be used to determine an adjustment for finished basement versus unfinished basement, but so much depends on the quality of finish that it becomes very difficult.

so if you have new construction which is the scenario here you dont have a problem with adding up the builder costs to finish the basement for the comps, add or subtract the sum of the subject property's finished basement and then report that difference to the comps as the finished/unfinished basement line item adjustment?

 

[Deleted member 128537]

This seems really confusing to me.
1) The only time I use cost-depreciation is if I don't have a comp sale. This is generally only relevant on newer homes that have pretty decent finish.
2) I typically combine the unfinished area and the finished area in one adjustment. This could be why the figures are the way the are. But still doesn't make sense in this report. I then explain that in the comments. That's the way my software works. Then I may do a room adjustment on the lower line which is typically for the bathroom or lack thereof.

The problem of course with basement finish is that it often can vary a great deal with regard to quality even in newer homes. I've seen some newer homes with minimal finish and some with finish nearly equal to the above grade finish. And if there aren't many sales of homes with basements like in my area then it becomes kind of difficult.

 

[NachoPerito]

so if you have new construction which is the scenario here you dont have a problem with adding up the builder costs to finish the basement for the comps, add or subtract the sum of the subject property's finished basement and then report that difference to the comps as the finished/unfinished basement line item adjustment?

Sounds about right. Builders generally reflect the market when constructing spec. If it didn't have a return on the investment they wouldn't put it in.

 

[Digger88]

Sounds about right. Builders generally reflect the market when constructing spec. If it didn't have a return on the investment they wouldn't put it in.

well i for one think that is wrong kimosabe! a builders cost has nothing to do with an items contributory value. pricing sheets change all the time and have nothing to do with the market. last new construction i did the on site agent said each new section reflects a 5% increase in base price over the prior section. using builder price sheets to determine adjustments is not a recognized method or technique. cant believe so many here appear to agree.

 

[ucbruin]

well i for one think that is wrong kimosabe! a builders cost has nothing to do with an items contributory value. pricing sheets change all the time and have nothing to do with the market. last new construction i did the on site agent said each new section reflects a 5% increase in base price over the prior section. using builder price sheets to determine adjustments is not a recognized method or technique. cant believe so many here appear to agree.

"using builder price sheets to determine adjustments is not a recognized method or technique. cant believe so many here appear to agree."

Perhaps it is....

 

[Michigan CG]

but you dont agree with the use of builder cost to determine the adjustments dollar for dollar do you?

Not at all. I have never seen the COST to finish a basement equal the contributory VALUE.

But as Nacho said, if it is depreciated cost that is different. The problem with the depreciated cost method is one needs sales of homes with finished basements and one needs to figure out the depreciated cost attributed to the basement area and the remainder of the home which is not practical. BUT........ if one has sales of homes with basements why not just use those for matched pairing?

a builders cost has nothing to do with an items contributory value. pricing sheets change all the time and have nothing to do with the market.

When I first responded I did not think we were talking about new construction and maybe we aren't. I have seen some basement finish in my market for new construction. Pricing DOES sometimes does have something to do with market value.......... if cost never equaled value then we would never have new construction.

So if we are talking about new construction I see what the appraiser is doing but without seeing more of the report or knowing the market area it is hard to give an opinion. In my market I would call BS.

 

[Digger88]

Not at all. I have never seen the COST to finish a basement equal the contributory VALUE.

But as Nacho said, if it is depreciated cost that is different. The problem with the depreciated cost method is one needs sales of homes with finished basements and one needs to figure out the depreciated cost attributed to the basement area and the remainder of the home which is not practical. BUT........ if one has sales of homes with basements why not just use those for matched pairing?



When I first responded I did not think we were talking about new construction and maybe we aren't. I have seen some basement finish in my market for new construction. Pricing DOES sometimes does have something to do with market value.......... if cost never equaled value then we would never have new construction.

So if we are talking about new construction I see what the appraiser is doing but without seeing more of the report or knowing the market area it is hard to give an opinion. In my market I would call BS.

yes its new construction. and pricing will always have 'something' to do with value but almost never equal. maybe possibly an upscale kt in an expensive neighborhood... that is exactly what this appraiser said. and you really dont need to see more, everything i posted is all that was said pertaining to bogus basement adjustments yet some here agree. my dumb assembly line appraiser self is perplexed.

 

[Joe Flacco]

If the buyers are paying the full price of the finished basement option from the builder then the adjustment is the price of the option. It this is the case then you would have paired sales to back it up.