Basement finish question and value

[IAmortgageUW]

I'm a mortgage underwriter. I want to refinance my home, but I pulled comps and there were none that meet the value I need and think my home is worth. It is only 720 square feet, with a full partially finished basement. There were several comps ranging from 800-1000 square feet, most with 100-500 square feet of below level living space. So I was thinking, if I finished the basement, the appraiser could potentially use these comps, which are all similar in most other aspects of my house, besides bedroom count. Mine is a 2 bedroom, these are all 3 bedrooms.

So- the basement is comprised of 4 rooms. One is an unfinished laundry with stall shower, so wouldn't be included because I am not finishing it at this time. The second room would be a family room. The third room has a closet, but no egress window, which I don't think would matter either way, since it wouldn't be included in the bedroom count. The fourth has a fuse box on the wall, could that be considered livable space/below grade square footage anyway?

All rooms (besides laundry) have drywall/wood paneling walls, ceilings, heat/cooling vents, and lighting. I just need to add subflooring, paint and trim. The ceilings are 7 feet, so meets the requirements.

Basically, I just want to do a rate and term refinance but I don't think my value is going to be there. I have a purchase money second mortgage, so I'd rather straight refinance since the Home Affordable Refinance Program would only apply to the first mortgage. And I'm not experiencing financial hardship and have made my payments on time, so can't go with any other loan modification programs.

Thanks for any advice!

 

[JTip]

but I pulled comps and there were none that meet the value I need and think my home is worth.

There is nothing an appraiser or anybody can do to fix this fact.

I have a purchase money second mortgage,

I assume this means you put zero down when you bought the house. Let's hope your job continues and you can afford your current mortgage while waiting for the market to progress in order for sales to increase in value and volume.

Hope your rates were favorable when you purchased your home. Good luck.

 

[Thomas Fiehler]

WHat's the question? You have a 1 story with basement. Not sure what else you are asking.

 

[Delta85]

I'm a mortgage underwriter. I want to refinance my home, but I pulled comps and there were none that meet the value I need and think my home is worth. It is only 720 square feet, with a full partially finished basement. There were several comps ranging from 800-1000 square feet, most with 100-500 square feet of below level living space. So I was thinking, if I finished the basement, the appraiser could potentially use these comps, which are all similar in most other aspects of my house, besides bedroom count. Mine is a 2 bedroom, these are all 3 bedrooms.

If you've pulled comps and none help meet your value (assuming you are pulling comps based on similarity and not sales price) then you have a big problem. If your home is 720 sq. ft. and your comps are all 800-1000 sq. ft. that is your second problem. If they are all 3 bedroom and yours is 2 that is the third problem.

In my area room count is above grade only. Anything below grade that is finished would be credited toward finished basement area but not toward GLA or utility/room layout. My market does not automatically consider these areas part of the room count. Not sure about yours.

So you are still faced with the problem of bracketing your GLA and bedroom count and very likely if you do this properly your comps will indicate an even lower value than you have now.

 

[IAmortgageUW]

Ok, first- I really don't appreciate the first answer, which was rude. I am amazed at the rudeness to those who simply come to a forum specified to answer the public's questions, and act that way.

Second, yes I took 100% financing, it was 2005, I was young, and they were handing our mortgages to everyone left and right. However, I do live in a smaller town, south of Des Moines, Iowa, which has a lot of new construction of larger, newer, homes, so comps for a house of mine's age/size/bedroom count are hard to find.

I was simply trying to find out if it was worth my time to finish the basement, in order for the appraiser to possibly use the comps which have a slightly larger GLA. There was only one 2 bedroom comp in the last 12 months, and no comps to bracket the low end of my 720 sq foot house. I'm not fishing for inflated value- there are just no comps, and I wanted to know if doing this could help me, or if I should try the HARP program instead.

I had been renting this house out for the past three years, sold the larger house I had been occupying in a town 2 hours away where I met my husband. I would like to try to reduce my rate, to pay down this mortgage faster, and sell to buy another, more permanent home.

Thanks for any advice.

 

[Restrain]

Spend the bucks and have a local appraiser look at it for you. Will not cost that much in the grand scheme of things. That way you will have the facts in front of you so you can make a decision. Just be sure to use one that has been working your market for a long time. Good luck.

 

[Webbed Feet]

Ok, first- I really don't appreciate the first answer, which was rude. I am amazed at the rudeness to those who simply come to a forum specified to answer the public's questions, and act that way.

I read the first answer a couple of times. There was nothing rude at all about it. As it turns out, it was only correct. You appear to not like a correct answer that doesn't meet your wishes.

<....snip......>
I was simply trying to find out if it was worth my time to finish the basement, in order for the appraiser to possibly use the comps which have a slightly larger GLA. <......snip......>

Thanks for any advice.

You're expecting too much out of us and forum answers. Real estate analysis for valuation purposes is far too complex for any of us to be trying to answer such questions based on so serverly limited information. I recommend you get back to the basics. Cost does NOT equal value. In other words, what you spend finishing unfinished basement space is very likely to return considerably less than what it cost to do.

Attempting to manipulate a real estate situation like you've put forth, in order to affect the selection of comparable for the purpose of obtaining a greater valuation outcome, is a gamble based upon unknown future variables that cannot be adequately predicted. You could obtain before and after appraisals to try and judge the worth of your idea, but that would be no guarantee that if and when you got the work done that the results of an appraisal at that later time would be the same.

 

[Mountain Man]

Even if you finished the rest of the basement, it's still basement. So it's not a question of if larger GLA sales comparables can be used, it's a question of what would be the contributory value of your efforts and cost? That can only be answered by pulling the trigger and starting the loan process to see where the loan to value ratio ends up.

The up side is it sounds like your area is growing and would be a desirable property with mostly larger homes being built. So maybe you could rent THIS house and qualify for a new larger home with both yours and your new husbands credit and assets? The down side to that is that unfortunately many in MY area are forced to do "cash in" refinances when it comes time for renewing equi-lines and non-owner occupied loans. This year I've had to add another $10,000 on one of my own rentals before the bank would even talk to me. Will have to add another $10,000 after the first of the year for another... that's just the way things are right now. Depleting me savings to keep me investments, but they are still worth more than what I paid and are cash flowing.

 

[Cob]

If you are a mortgage UW, then you should know that basements usually don't count as gross living area in most markets, so if you finish out the basement your house will still have the same amount of gross living area and a nice finished basement. It is not going to magically make you house larger in gross living area.

 

[NorthTexValuation]

I'm a mortgage underwriter. I want to refinance my home, but I pulled comps and there were none that meet the value I need and think my home is worth. It is only 720 square feet, with a full partially finished basement. There were several comps ranging from 800-1000 square feet, most with 100-500 square feet of below level living space. So I was thinking, if I finished the basement, the appraiser could potentially use these comps, which are all similar in most other aspects of my house, besides bedroom count. Mine is a 2 bedroom, these are all 3 bedrooms.

Your deal ain't happening because you already appear to have pulled the highest priced comps of similar houses and you stated "the value you need" isn't there.

As another poster pointed out, you should already know that a basement is NEVER, and I mean EVER, included in Gross Living Area (by definition). If finished it will add more value than unfinished, but maybe not what it costs and only an appraisal done "subject to" or after completion would tell you what it contributes to overall value.

The bedroom count difference is another factor that will work against your value. If there aren't any two bedroom comps, that usually means "the market" expects at least 3 bedroom houses and therefore any pool of potential buyers will be much smaller and therefore your house has less market value than the exact same house with 3 bedrooms.

Sounds like you need to wait for the market to increase or bring cash to closing.