Basement Finished Area

[ProspectMI]

I'm curious as to what other appraisers do in markets with basements when it comes to estimating finished basement area.

Over time I realized that the only way I can confidently do it and maintain some sort of consistency across the board is to estimate the finished area based on a 95/50/0 method that I came up with on my own. This was a result of listing agents never being able to properly reflect the finished area of basements on the MLS. When the MLS shows the basement is finished, I take the entire basement area and factor that 95% of the basement is finished with 5% being attributed to utilities. Part finished I go 50% and unfinished I go 0%. I document this in my report as an estimation only to remain consistent with my adjustments and I include an extraordinary assumption in this as well.

A few years back when I was trying to get a designation through Appraisal Institute, the person reviewing my reports said this method is fine as long as I explain my method.

In 2020 I was removed from US Bank's approved appraisers list for improperly documenting a trainees assistance, and as of this week was denied approval to be back on the list and they cited my basement methodology as one of the reasons.

I should note that this estimation is primarily for comps and not the subject, although I do use it for the subject as well as it is challenging to get an exact calculation of finished area in many instances in my market area.

What are other appraisers doing for basements?

 

[Terrel L. Shields]

This was a result of listing agents never being able to properly reflect the finished area of basements on the MLS. When the MLS shows the basement is finished, I take the entire basement area and factor that 95% of the basement is finished with 5% being attributed to utilities. Part finished I go 50% and unfinished I go 0%

That is not a market based assessment. That is a rule of thumb. So, in a home without a basement, do you subtract out the HVAC closet? Me neither.

 

[ProspectMI]

That is not a market based assessment. That is a rule of thumb. So, in a home without a basement, do you subtract out the HVAC closet? Me neither.

great point. So how do you approach it?

 

[Terrel L. Shields]

I don't. If basement is finished, the unfinished area is labeled such and finished area what it is.

I do try to then compare basement houses (note- in our area a basement is fairly rare- unfinished or not) So, I scour for basement sales, and try to extract a contribution accordingly. If I have say 3 sales without basement but the houses are similar to 2 or more with basement, then I can estimate the SF adjustment with sensitivity or simple linear regression. So, if I come up with $80/SF for GLA adjustment, I think apply that to the houses with basement to extract the value of the basement and divide this difference by the SF for a basement contribution. Here, a typical finished basement is about half that of the GLA to maybe 3/4ths. The higher number usually reflects a walk out basement on a steep lot. Unfinished basements would typically be one-quarter to one-third the value of the GLA adjustment. If the basement is finished except HVAC, unless large area, I'd just call it what the rest of the basement is-fin or unfin

 

[Joe Flacco]

What is improperly documenting trainee assistance?

 

[Joe Flacco]

It depends on what information you have available. For actual numbers, there is data imputed by the agent and data from assessor records. If there are issues with one or both, you also have photos of the interior you can look at to estimate. The listing might also have a floor plan you can look at and estimate off of that.

 

[ProspectMI]

What is improperly documenting trainee assistance?

When I was a trainee back in 2011-2013, my supervisor and nearly all appraisers in my market, weren't having trainees sign the reports and our experience was only noted in the addendum. I was able to receive my license with this documentation as well as two of my own trainees. Considering there was never any push back from lenders/clients, this was how we always did it. Even some AMC's told us to not have the trainee sign. Obviously this wasn't the right way and was against USPAP, but it's what we did. Even after trying to fix this, US Bank still didn't approve.

 

[Joe Flacco]

When I was a trainee back in 2011-2013, my supervisor and nearly all appraisers in my market, weren't having trainees sign the reports and our experience was only noted in the addendum. I was able to receive my license with this documentation as well as two of my own trainees. Considering there was never any push back from lenders/clients, this was how we always did it. Even some AMC's told us to not have the trainee sign. Obviously this wasn't the right way and was against USPAP, but it's what we did. Even after trying to fix this, US Bank still didn't approve.

They should revoke your license.

 

[ProspectMI]

They should revoke your license.

ok guy. take a hike

 

[TerryRohrer]

When I was a trainee back in 2011-2013, my supervisor and nearly all appraisers in my market, weren't having trainees sign the reports and our experience was only noted in the addendum. I was able to receive my license with this documentation as well as two of my own trainees. Considering there was never any push back from lenders/clients, this was how we always did it. Even some AMC's told us to not have the trainee sign. Obviously this wasn't the right way and was against USPAP, but it's what we did. Even after trying to fix this, US Bank still didn't approve.

I am not sure exactly what you did, but there is no requirement anywhere that I am aware of that requires a signature on a report in order for experience to count. The requirement is to document the assistance and who provided it.