How to value below grade finished and unfinished areas

[BigBlueNation]

In my area, a basement is rare and rarely brings the same contributory value as the gross living area. The exception is lake shore properties with a walk out basement that is finished. Even then it can be a case by case issue. Unfinished basement normally contributes something here. But if wet, moldy smell, etc. either finished or not, not good.

Years ago I appraised a 2200 SF house with a 2200 SF finished basement slight odor noted and the owners ran a dehumidifier there. I valued it roughly half the $/SF as the GLA. An agent then told them it was 4400 SF and priced it accordingly...about $200,000 higher than my appraised value. It sit for 2 years until the owners relented and listened to another agent who priced it as 2200 SF with a finished basement and bingo, sold for about $20,000 more than I appraised it which was about right since prices had increases somewhat in the meantime...

Thank you

 

[BigBlueNation]

" a below grade finished area does not have the same value as above grade area but it has some value. " <<<< Not necessarily correct.

Depending on Market Reaction (actual buyers of closed competitive sales) finished basement area may return similar value as above grade or less. It depends on the actions of actual local buyers of the most competitive local properties. AND, BUYERS TRENDS CHANGE over time.


Contributory value for any improvement is extracted from directly competitive local Closed Sales which would serve as a substitute for a subject (all it's attributes - location, view, dwelling, floor plan, above and below grade utility, quality, etc.)

The answer you seek can likely be found in identifying and comparing them to each other and then to the subject.

Adjustments to comparable are extractions from those sales - as of an Effective Date of Appraisal. (Sales Comparison Approach to Value).

Improvements may yield less than costs, including $0. if an overimprovement, more than costs, or = costs (possibly depreciated depending on time factor vs installation of the improvement(s).

Directly Competitive Closed Sales with finished basement, partially finished basement, unfinished basement (similar in size to a subject) can indicate buyers reactions to those improvements (if any) as well.

"Paired sales analysis" in your CMA is the tool.

In my area, a basement is rare and rarely brings the same contributory value as the gross living area. The exception is lake shore properties with a walk out basement that is finished. Even then it can be a case by case issue. Unfinished basement normally contributes something here. But if wet, moldy smell, etc. either finished or not, not good.

Years ago I appraised a 2200 SF house with a 2200 SF finished basement slight odor noted and the owners ran a dehumidifier there. I valued it roughly half the $/SF as the GLA. An agent then told them it was 4400 SF and priced it accordingly...about $200,000 higher than my appraised value. It sit for 2 years until the owners relented and listened to another agent who priced it as 2200 SF with a finished basement and bingo, sold for about $20,000 more than I appraised it which was about right since prices had increases somewhat in the meantime...

 

[BigBlueNation]

Thank you