Below grade utility

[MARKETVALUE]

Hey Gang-

Anyone have any foolproof valuations on how to determine market reaction or functional utility adj. to a home with kitchen, dining room and living room below grade (all the way below grade, no if ands or buts).

Utility above grade is three beds and one bath.

Any input would be appreciated.

MRM

 

[Steve Owen]

This is highly dependent on your local area market reaction to this type of construction. In Missouri, walk-outs or berms, with either the main part of the house, and in some cases the entire house being below grade are not that uncommon. Usually, I can find past sales of other similar properties, so I don't have to worry about how they compare to above-grade construction.

From what you describe, however, I assume that your subject is not a walk-out or berm, but rather a traditional basement, with all four sides below grade. That would be a little tougher, since you are probably not going to find a lot of market data. My suggestion would be to find those properties most like it, which will probably be berms, split-levels (with part of the house below grade), or raised ranch styles with full, finished basements.

Since most people don't like to live in a cave, your subject will probably be somewhat less functionally desirable than those most similar comps. However, don't forget that there are a few people who do like to live below grade and you are measuring the entire market, not just individual preferences of a few buyers. Someone will probably buy this house. One possible solution; increase the exposure and marketing times to reflect that there are fewer potential buyers (if that is what the data seems to indicate).

 

[MARKETVALUE]

Good idea for a little CYA with marketing and exposure time.

Plenty of data of splits and ranchs on basements. Below grade above decribed subject utility is a purple dinosaur in this neck of the woods.

MRM

 

[The Bob]

In my neck of the woods (Richmond, VA) I've seen this in mainly two types homes.....Old historic homes and lake/waterfront. In both cases I was able to find a comp with similar layout. Result? No market data to support an adjustment one way or the other. From the wording of your question I am assuming you have some reason to believe an adjustment is warranted. Is this so?

 

[Richard Carlsen]

Did one about a month and a half ago out in the sticks. (They are all out in the sticks in Northern Michigan---that’s a joke people). The owner put an addition to a cottage and put the ditchen/dining/living/0.5 bath down on the walkout level and the 3 bedrooms and bath upstairs. I had to call it living space because without counting the lower level, there was no habitable utility to the house.

Of course there were no comps for it. I chose not to make any adjustments in the sales grid, as there was no way of measuring the markets reaction to this setup. I did take an estimated -10% in the cost approach and let my final weighted adjusted sales price be influenced down by the cost approach. The final estimate of value felt right. A total of 5 comps were supplied. Have not heard a peep out of anybody to date.

About the same time, I did the sale of a bi-level that had kitchen/dining/bath/bedroom down and living room/ bath and 2 bedrooms up. Same situation, same procedure. No problems.

 

[TEL2002]

This is not an answer to the question, but a comment on how we must do the square footage and an alternative idea. Would it be clearer if we rated properties on four areas of square footage, ie.

Above Grade Finished
Above Grade Unfinished
Below Grade Finished
Below Grade Unfinished

I think the above would cover all situations of a buildings square footage. This would make it simpler to make adjustments. I am so tired of trying to explain to people (owners and REA's) why a finished basement is not included in GLA. The above 4 categories would be easy for the county, RE agents, and appraisers...no more arguments...except how do you define finished. One homeowner was upset with me because he had stapled shelving paper to the basement ceiling, painted the concrete block walls, put in an old piece of carpet and said his basement was finished.

 

[Steve Owen]

I agree. Effectively, that is how I do it now. In fact, I believe USPAP and good practice dictate doing it the way you have suggested. Unfortunately, the forms used in the industry today do not easily facilitate that treatment.

 

[BarbaraNJ]

Marketvalue:

You may want to browse the posts about egress windows for some comments on below grade living.

Beyond that, I THINK you are talking about a significant adjustment. IF the entire basement is below grade (not a "walk-out"), then our FNMA 1004 form will not count it as living area. Look on the form, just below the room count grid on the first page. It says "Finished area ABOVE grade contains:"

Therefore, if you CANNOT consider that which is below grade as anything else but "finished basement", you need to make a functional/physical adjustment to re create a kitchen above grade. No one says that you HAVE to have a living or dining room, but I think every "typical" buyer expects a home to come with a kitchen.

Good Luck..........if this were EASY, the lenders wouldn't need us, now would they???

P.S.---Ever wonder what would happen if some bank loaned these people money based on a computer generated (AVM) value ?????

 

[jtrotta]

Over the years (and i mean quite a few) we have found that the Asia community lends itself to this style of living; Euro., factions tend to use the 2-kitchen sydrome, lower level for summer use and upper for winter use. I believe you may have to search & find which possibly fits what your describing :?

The main question is possibly, is it marketable :?: and is that market limited :?: then the search begins, as to how Limited is it's market and is it possible to have it conform to the majority of the marketplace and at what cost :?:

Good Luck


8)

 

[Verne Hebert]

If it is a purple dinosaur; its a purple dinosaur. If you cannot measure it, what does your gut tell you? As Richard commented earlier, "that warm fuzzy feeling" unfortunately is part of the job when the data gets boney. As an experienced appraiser, unfortunately, there are some times one has to get more subjective than they would like.

Make the statement, make the assumptions, rely on you experience and finish the assignment.

Here in this market, I too have seen this layout in walkout daylight basements, generally on the waterways. Here, extended marketing time, slight reduction in value as a result of the extended marketing time.