How to value below grade finished and unfinished areas

[BigBlueNation]

I understand that a below grade finished area does not have the same value as above grade area but it has some value. How do you put a value on that area, also does an unfinished area have any value. You help is greatly appreciated.

 

[CANative]

I understand that a below grade finished area does not have the same value as above grade area

Who told you that?

 

[CANative]

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.

 

[Mark K]

...., also does an unfinished area have any value.

In my area it has value, sometimes significant value. Basement costs in this area runs about $35/sf new. Depending on the property the market often shows that its worth nearly the same $ amount. Basically, the answer is it depends on the type of basement, the age and price range of the house.

A 50 yr. old house on a 7' tall conc. block basement, home in the $150K range...worth maybe $5/sf. New home, walkout basement, 9' poured concrete walls, $400K + price range...worth close to actual cost. FYI the avg. price in this area is about $200K.

 

[Mike Kennedy]

" 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.

 

[Terrel L. Shields]

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]

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]

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]

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]

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