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RESIDENTIAL HOMES WITH FINISHED ROOMS BELOW GRADE

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lisa dorschner

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Joined
Apr 28, 2002
:p I have someone working with me who is in the process of getting her education hours to obtain her license. Their class is divided as to what appraisers do with finished rooms below grade. I'm looking for input on this topic and appreciate any responses. Some people in the class claim that appraisers ALWAYS include any and all finished rooms below grade in the GLA. The teacher of this class is not an appraiser or has never done an appraisal, the instructor is a realtor, agrees with the people who say you do include lower level rooms in GLA. Some of the people in the class say that you NEVER include finished rooms below grade in the GLA. Would anyone like to respond to this??? My concern is that some of these people who will someday be joining us in the appraisal field will be doing this incorrectly. Thank you for your responses.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
You don't include below grade rooms in gross living area. You can state total living area, but don't mislead about below grade areas. Who is teaching this class and why are people taking this class from someone who doesn't know basic appraisal guidelines and techniques? I would ask for refund.
 

Jeff Horton

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Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
Simple, the URAR form ask in the grid for "ABOVE GROUND ROOM COUNT AND GROSS LIVING AREA". Then it has a line for "BASEMENT AND FINISHED ROOMS BELOW GRADE".

I have fought this battle recently with an exceptional nice basement in a home. But it is below grade so it is not going in the GLA of house. The realtor was about ready to have a cow over this one.

I am sure someone can quite FNMA guildlines but I believe that specify them to be called out seperate also.
 

Farm Gal

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Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Aside from other numerous publications which uniformly state that anything below grade AT ANY POINT is basement... ANSI guidelines and The Fannie Mae Selling Guide (04/12/2002) clearly state how a house should be measured:

Sec 405.05
URAR Form 1004 include a "room list" section to describe the subject property and provide a column for the square footage per level as well as space for a summary of the above grade gross living area for the finished area.

Sec 405.06
... Only finished above grade areas should be used. ...

It then goes on to make several spcific distinctions between above grade areas=GLA, below grade = Basement...

Not that below grade finsihed areas are not without value, but that they must be reported as finished BASEMENT not included in the GLA!
 

wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
Here is FNMA guidelines on this.

Section 405.06 – Gross Living Area

The most common comparison for one-family properties (including units in PUD, condominium, or cooperative 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. For units in condominium or cooperative projects, the appraiser should use interior perimeter unit dimensions to calculate the gross living area. In all other instances, the appraiser should use the exterior building dimensions per floor to calculate the above-grade gross living area of a property. Only finished above-grade areas should be used--garages and basements (including those that are partially above-grade) should not be included. We consider 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 and finished areas below-grade" line in the "sales comparison analysis" grid. To assure consistency in the sales comparison analysis, the appraiser generally should compare above-grade areas to above-grade areas and below-grade areas to below-grade areas. The appraiser may deviate from this approach if the style of the subject property or any of the comparables does not lend itself to such comparisons. However, in such instances, he or she must explain the reason for the deviation and clearly describe the comparisons that were made.

FNMA states that if any portion of the exterior is below grade it is basement. The last lines are what cut it though. The appraiser may deviate from this but must clearly describe said deviation.

So as seen even the guidelines do not specificaly state yes or no.

Ryan[/b]
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Ryan:

Thanks for posting the actual verbage, I didn't have time to type it out...is there a good place to download a cut n pasteable version?~~

I disagree, and here is where we go to parseing line by line:
The guidelines clearly state that the floor area "where ANY PORTION is below grade" is basement: those last two lines were intended give you an option in the grid portion of the appraisal, particularly on multi-level homes - to place the rooms and areas as 'apropriate' on the grid Got only two lines and three distinct types of levels? - above grade, partially below and fully in the hole, go ahead and view it like the market does, BUT EXPLAIN YOURSELF :x !!!

AND you can use GLA to describe a earth contact... but best explain what ya did and why :evil:

Folks who weasel into other areas using those two lines as an out are just bending the rules :roll: ! IN MY SOLID opinion!
 

wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
Lee Ann,

I generaly tend to agree with you on that issue. I did not mean my post to sound as though I don't agree with the theory that basement finished area should be included in GLA count.

However, that does bring up and intersting point and possible example of when you might do this.

IE... Appraised a waterfront property the other day. House had a daylight basement no bedrooms above grade. (1,500 Above 1,500 below fully finished) All bedrooms were below grade 3 beds/2 baths. House was built to enhance the view from the main level. If strict adherence was to FNMA guidelines the house would have no bedrooms and 1 bath above grade. However, since on that Lake I had 2 sales that were similar no above grade bedrooms and fully finished basements (good quality houses $500K to $750K range), one house that had a 1 bedroom above grade and one two story house similar in GLA to the comps GBA. I included the basement finished area as GLA (on page two of URAR) and bedrooms/bathrooms as such. I also explained why and how and quoted the FNMA guidelines. This worked out and was proven by the analysis of the comparable sales that the market reaction showed no difference from a two story house to a daylight basement house with lake waterfront market was more intersted in quality/condition/wtf feet/GBA than style difference.

On the other hand I could show plenty of examples that finshed basements are worth less than GLA. So I belive there are exeptions to that rule. I don't think we as appraisers should go in with preconceived notions of something but simply go off what the market is telling us.

Ryan :twisted:
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
:lol:
Agreed that sometimes forms are square pegs and our houses are round, starshaped, or even near undescribable !

I agree that in the instance you describe that it is reasonable to do the 'grid thing'... bbbut I personally PREFER to see below grade living area on the basement line, even in the case you describe!

As long as you are compareing apples to apples, hey you CAN adjust the lower level at the same $ per square foot as main level.... and DUH folks you can even adjust individual comps (with say rec finish) at a different value!!! Laearning how to run your software is a GOOD thing :wink:

Wanna hear baout my recent NO bedroom house? Entry stepped down to a landing, and it went down hill from there (literally) :roll:

Anyway the problem (as I see it) is that the REALTORS get ahold of your report and it is forever after OK for them to do the same!!! Wel the APPRAISERSdo it this way too! :evil:

Hence my attitude.

I rest my case, fingers,.. and hmm it IS almost Miller time.
(any bets the Colorado contingent is still lunching?)
 

Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
This was a big issue in the NAIFA publications 5 or so years ago, and was ongoing for a couple of months. The end analysis was, there were times deviation was appropriate, if clearly stated. Which is consistent with the current FNMA criteria.

I have compiled a few properties this way because it was the logical method of compilation to keep the report clean and more consistent; and easier to understand.

In the basement section, I put "included above" and clearly elaborated in the body of the report exactly what was happening.

It is almost "Miller Time"
 
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