Including Above Grade Area Into Basement or Below Grade Area

[Terrel L. Shields]

I do not like off-setting adjustments.

Neither does almost everyone, but the reality is ANSI puts you in this position and if not then FNMA muddies the water with exceptions.

But seems easy enough to find out what is finished or not next door. Someone knows - owner or last agent, etc. ask.

 

[Joe Flacco]

We technically only have to report the subject to ANSI, not the comps. Two ways to go about it.... report the subject to ANSI and modify the comp to match the subject in the above- and below-grade finished lines, which may contradict the ANSI standard for the comp. Alternatively, you can report the subject all the comps to ANSI, but include no adjustment in the above- and below-grade lines, then add a "total finished/unfinished SqFt" on the bottom line and adjust there.

That is an interesting point and is logical to me if those are the rules. And then they will flag you for your comp data differing from peers. lol

 

[Joe Flacco]

Let me give you a real life scenario that prompted this question: Using the county records....above grade and below grade SF are clearly separated. Subject is a tri-level home with the living room located behind the garage. From the garage, you have a doorway that opens to the living room. The living room is all above grade. From the living room....you go up a 1/2 flight of stairs to the kitchen, entryway and office. From the living room, you can also go down to a 500 SF finished basement that has a bedroom, bath and craft/laundry room. From the mid level entryway, you go up a half flight of stairs to the upper level with 3 bedrooms and 2 full baths.

Appraiser researches comps prior to visiting the property. Within a 2 mile search, the appraiser states that he can't find any homes with 500 SF basement. Because of this, the appraiser adds the 540 SF above grade living room into the basement line to bump up the basement SF and calls the home a bi-level. Appraiser doesn't value the basement area the same as above grade area which results in a lower value. Appraiser is fully aware that the living room is above grade. In other words, this wasn't just a mistake.

The subject has an attached 2-car garage as well as a 800SF detached garage/shop with a storage loft of over 500SF. The shop has a 12' high commercial roll up door and the interior height can accommodate a car lift. The appraisal doesn't use any comps with a detached shop and states the shop has inferior utility to an attached garage. Comps with 3 car attached garages receive no adjustment for the detached shop amenity. Comps with attached 2 car garages receive an upward stall adjustment. The subject detached shop by itself is larger in SF than the 3 car comps. The 500+ SF storage loft receives no contributory value. Detached shops in this market have excellent appeal and with an expanded search you will find sales with similar detached shops.

In my 20+ years of appraising I've never seen where an appraiser deliberately puts GLA in the basement area. Yes, I've seen finished basement area included in the above grade line. And yes, I've seen finished basement area valued the same as above grade area....especially on hillside homes.

Please pick this apart and tell me if you agree or disagree with the approach the appraiser used on this real life example. I'm not looking to over react....and therefore would like to seek your opinions on this. Disclaimer: This is my personal home and yes, I have emotions involved.

Note: I've attached a photo of a similar tri-level design. I've also attached the appraisers sketch and my sketch.

For that, I measure like the "appraiser sketch" and not the "my sketch". The garage level is below grade on at least one side. The floor of the entry level is the grade on that side.

It's similar to a ranch but half the house was offset by half a floor. 1 level + basement

 

[residentialguy]

Okay. Assume you work in a place where the MLS reports total heated (or finished) area of split levels or split foyer designs with little or no attention to what is below grade and what isn't. Your subject is a split level. The lowest level is fully finished and is also below grade. You measure and report GLA in accordance with ANSI so, that lower level will be reported as finished basement. The other levels will be GLA. That's page one of the 1004. On page two, all of the finished area is included in the SF line of the sales comparison grid... just like what the MLS reports for the comparables (also split level)... and you make adjustments based on those differences. Your comments will say something like... "It is common and accepted practice in the subject market to report all finished area, both above and below grade, as the square footage of the property. Buyers and Sellers in this market typically think in terms of total finished area. In the description sections of the appraisal report, the subject dwelling has been described in conformance with GSE requirements. In the sales comparison grid, the square footage of the subject dwelling has been reported in accordance with local market practice in order to facilitate direct comparisons and adjustment.'
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If you have comparable sales data that adequately breaks out finished/unfinished, above grade/below grade areas then, there is no need to jump through any hoops.

No... report the comps like you reported the subject. You don't report them how the market reports it. That has nothing to do with appraisal use.

 

[residentialguy]

An above grade "basement". I have similar designs in my area. The bottom level has a garage and a small den, family room and maybe a 1/2 bath and mechanical room. Not a "basement"

What do you mean "not a basement"? That is a poster child of a typical finished basement.

 

[residentialguy]

..........

 

[residentialguy]

View attachment 82097

Two identical townhouses across the street from each other.

Do you guys say the left is 2,000 SF above grade with no basement and the house on the right is 1,600 SF with 400 SF basement?

Depends on what that lower level functions as... either way, that should be compared the same way.... IOW, one of them will be an ansi exception. (My guess is that it functions as a basement)

 

[Joe Flacco]

Depends on what that lower level functions as... either way, that should be compared the same way.... IOW, one of them will be an ansi exception. (My guess is that it functions as a basement)

That is how I see it and do it. They are both two levels with basement.

I don't say one is 2 levels plus basement and the other is three levels and no basement. That's for sure. The two houses are exactly the same and I report it that way in the grid.

 

[Dublin ohio]

What do you mean "not a basement"? That is a poster child of a typical finished basement.

A 100% above grade "basement". Ok fine. If you are arguing that it "functions" as a basement to some. But it is all above grade. Fannie classifies it as GLA. What if there was actually a basement area below it. What would you call that.

 

[Joe Flacco]

That is called a sub-basement. I have seen sub-basements maybe twice in 17 years.