FHA Appraisal - What Is A Basement On A Split Level

[MarylandDave]

I have a four floor split level. The 2nd floor is level/or above grade to the area around it, but below grade to the far corner of the 3rd floor. Since the far corner area of the 3rd floor is above that of the 2nd floor is the 2nd floor considered a basement.

According to Fannie Mae guideline:

"Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. Fannie Mae considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count.​

So is the 2nd floor above or below grade and considered a basement?

 

[hastalavista]

I think you left out the part where Fannie says local customs may dictate something different, and if so, the key is for the report to compare like-for-like.

Also, if this is an FHA appraisal, you are better served by determining if FHA speaks to the matter.

Good luck!

 

[hastalavista]

I'm sitting here with an FHA expert and we are somewhat confused by your description:

If the "...2nd floor is level/or above grade to the area around it" then I don't see how any of the 2nd floor would be considered a basement? The presumption is that on a multi-story residence, there are going to be some floor-levels below the highest floor-level. But if all those floor levels below are above grade, I (we) don't see how any of those floor areas can be considered basements.

I assume you are looking at an appraisal; what did the appraisal do that you are questioning?

 

[Sid Holderly]

Currently working on a recreational home partially built into the hillside. The second floor is below part of the garage that is at road level and the main level is 6 foot above ground at the front (water side) but goes back into the hill. A lot of explanation and trying to find similar construction on a hill. Local agents include all as living area. Good thing this is not FHA.

Try to find similar "tri" and "bi" levels and pick a pattern for listing the LA or finished area and explain. See how agents lists them then decide how yo will list of split up the areas. This may be more difficult is it is FHA. I have not completed an FHA on a tri-level before. There are locally tri-levels and tri-levels with basements. ANSI allows an exception for local practices for odd configurations. Explain explain ---

 

[CANative]

We don't have to call areas below the grade "basements." Look at Page 2 of the report under areas above grade and the the section below. There is an "or" in there. Basement or below grade living area.

Now take out your Selling Guide and read what it says about GLA.

This is a complex residential design and it defies the simplistic approach that the GSEs and FHA want. And there is no single answer that will help you here because it depends on a precise understanding of your property and more importantly the market. In California basements are very rare. But hillside custom homes with split levels are pretty common. Back east or in the midwest you almost HAVE to have a basement.

Gross Living Area
The most common comparison for one-unit properties, including units in PUD, condo, or co-op projects, is above-grade gross living area. The appraiser must be consistent when he or she calculates and reports the finished above-grade room count and the square feet of gross living area that is above-grade. The need for consistency also applies from report to report. For example, when using the same transaction as a comparable sale in multiple reports, the room count and gross living area should not change.

When calculating gross living area

• The appraiser should use the exterior building dimensions per floor to calculate the above-grade gross living area of a property.
  
  
• For units in condo or co-op projects, the appraiser should use interior perimeter unit dimensions to calculate the gross living area.
  
  
• Garages and basements, including those that are partially above-grade, must not be included in the above-grade room count.

Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. Fannie Mae considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count. Rooms that are not included in the above-grade room count may add substantially to the value of a property, particularly when the quality of the finish is high. For that reason, the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the Basement & Finished Rooms Below-Grade line in the Sales Comparison Approach adjustment grid.

For consistency in the sales comparison analysis, the appraiser should compare above-grade areas to above-grade areas and below-grade areas to below-grade areas. The appraiser may need to deviate from this approach if the style of the subject property or any of the comparables does not lend itself to such comparisons. For example, a property built into the side of a hill where the lower level is significantly out of ground, the interior finish is equal throughout the house, and the flow and function of the layout is accepted by the local market, may require the gross living area to include both levels. However, in such instances, the appraiser must be consistent throughout the appraisal in his or her analysis and explain the reason for the deviation, clearly describing the comparisons that were made.

https://www.fanniemae.com/content/guide/selling/b4/1.3/05.html

 

[CANative]

Here is the FHA on this issue (Handbook 4000.1)

d. Gross Living Area

i. Definition
Gross Living Area (GLA) refers to the total area of finished, above-grade residential space calculated by measuring the outside perimeter of the Structure. It includes only finished, habitable, above-grade living space.

ii. Required Analysis and Reporting

The Appraiser must:
- identify non-contiguous living area and analyze its effect on functional utility;
- ensure that finished basements and unfinished attic areas are not included in the total GLA; and
- use the same measurement techniques for the subject and comparable sales, and report the building dimensions in a consistent manner.

When any part of a finished level is below grade, the Appraiser must report all of that level as below-grade finished area, and report that space on a different line in the appraisal report, unless the market considers it to be Partially Below-Grade Habitable Space.

In the case of non-standard Properties and floor plans, the Appraiser must observe, analyze, and report the market expectations and reactions to the unique Property.

 

[glenn walker]

I agree with CAN on this one I would not call this area a basement and would include it in the GLA.

 

[Meandering]

The "house" is wood frame
the "basement" is concrete and is a type of "foundation" for the wood frame house above.



According to Fannie Mae guideline:

"Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. Fannie Mae considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count.

So is the 2nd floor above or below grade and considered a basement?

have a four floor split level. The 2nd floor is level/or above grade to the area around it, but below grade to the far corner of the 3rd floor. Since the far corner area of the 3rd floor is above that of the 2nd floor is the 2nd floor considered a basement.

You answered your own question.

.

 

[CANative]

Marion:

"The appraiser may need to deviate from this approach if the style of the subject property or any of the comparables does not lend itself to such comparisons. For example, a property built into the side of a hill where the lower level is significantly out of ground, the interior finish is equal throughout the house, and the flow and function of the layout is accepted by the local market, may require the gross living area to include both levels."

 

[hastalavista]

"The appraiser may need to deviate from this approach if the style of the subject property or any of the comparables does not lend itself to such comparisons. For example, a property built into the side of a hill where the lower level is significantly out of ground, the interior finish is equal throughout the house, and the flow and function of the layout is accepted by the local market, may require the gross living area to include both levels."

I already said that:

I think you left out the part where Fannie says local customs may dictate something different, and if so, the key is for the report to compare like-for-like.