Second opinion on above grade vs below grade

[MoistMitten]

First off I know that the new guidance is that a basement is always considered below grade, however I did have an appraiser say that this 'basement' was indeed above grade and if finished out would count towards the square footage. So this would increase the value of the house substantially as you can imagine on a lake front property. The entry level is technically more below grade than the 'basement' area. I know that cinder block can be considered a main living area as this is how the first floor of my current house was built, but the block is 100% above grade in this situation. I did check some comps and it seems that there are some that have walk out basements to the same extent where they meet the ground and are not really below grade if you look at how steep the grade is. When you look at the image the first floor on the left is about 4-5ft below grade as the windows are about 5-6ft off the ground inside. The two different roofs were when there was an addition on the right side of the house at some point and the 'basement' is only under that addition area. So I think the logic that the appraiser followed was since that lower level is above grade on 3 sides and I could have a door added on 3 sides and walk out then it could be included in the above grade gross living area if finished to the same quality as the entry level. I did also find a comp that supports this in this area.
So I guess I want to see what others think so I can double check their work as its really important on this property that the sqft is included. I can also dig down to make it 100% above grade for the block walls as its only a few ft down where it is below.
(Yes it will have the sketchy electric and stairs fixed)

 

[Tom D]

i use the ansi GXX001 exemption for this one. did it for one similar, no issue.

 

[shrubberyvaluation]

All is below grade partially. I would use the exemption and adjust elsewhere if there is a market reaction to it.

 

[Terrel L. Shields]

I would call it finished basement and be done with it.
What is the phobia? FNMA defines what is above and below grade. I don't understand evoking exception or why it is a big deal. I see this kind of housing less here than elsewhere but every time I see a Realtor try to market it as all "gross living area" when the assessor clearly calls it out as "basement" then sits for months over-priced... well.

Unless the assessor field card calls it 1 story and the level above 2nd story PLUS all the Realtors call it 2 story, I'd opt to call it a one story house with a walk out basement and find similar construction for comparison.

 

[shrubberyvaluation]

I would call it finished basement and be done with it.
What is the phobia? FNMA defines what is above and below grade. I don't understand evoking exception or why it is a big deal. I see this kind of housing less here than elsewhere but every time I see a Realtor try to market it as all "gross living area" when the assessor clearly calls it out as "basement" then sits for months over-priced... well.

Unless the assessor field card calls it 1 story and the level above 2nd story PLUS all the Realtors call it 2 story, I'd opt to call it a one story house with a walk out basement and find similar construction for comparison.

You would call the whole house a finished basement? The phobia is that you would have to put 0 rooms, 0 bedrooms, and 0 baths above grade with 0 GLA. It has nothing to do with the valuation, it has to do with how FNMA wants it reported.

 

[Fernando]

This example shows how appraisers have difference in opinion in invoking the exemption. Thus, Fannie needs to make it much clearer how to use ANSI.
Otherwise appraisers will do the Fernando Way, that is what is best for appraiser to use.

 

[Terrel L. Shields]

You would call the whole house a finished basement? The phobia is that you would have to put 0 rooms, 0 bedrooms, and 0 baths above grade with 0 GLA. It has nothing to do with the valuation, it has to do with how FNMA wants it reported.

If it all classifies as basement then so be it. Does it really matter when it comes to your valuation? FNMAs garbled epistle aside, it is worth what it is worth. And in my market, this property would be seriously impacted by this design. So the important thing is to find something remotely similar with the same functional obsolescence issues.

Unique Housing Types​

In the appraisal and appraisal report review processes, special consideration must be given to properties that represent unique housing for the subject neighborhood. Mortgages secured by unique or nontraditional types of housing, including, but not limited to, earth houses, geodesic domes, and log houses, are eligible for delivery to Fannie Mae provided the appraiser has adequate information to develop a reliable opinion of market value. It is not necessary for one or more of the comparable sales to be of the same design and appeal as the property that is being appraised, although appraisal accuracy is enhanced by using comparable sales that are the most similar to the subject property. On a case-by-case basis, both the appraiser and the underwriter must independently determine whether there is sufficient information available to develop a reliable opinion of market value. This will depend on the extent of the differences between the special or unique property and the more traditional types of houses in the neighborhood and the number of such properties that have already been sold in the neighborhood.


When appraising unique properties,

• 
  if the appraiser cannot locate recent comparable sales of the same design and appeal, but is able to determine sound adjustments for the differences between the comparables that are available and the subject property and demonstrate the marketability of the property based on older comparable sales, comparable sales in competing neighborhoods, the existence of similar properties in the market area, and any other reliable market data, the property is acceptable as security for a mortgage deliverable to Fannie Mae;
  
• if the appraiser is not able to find any evidence of market acceptance, and the characteristics of the property are so significantly different that he or she cannot establish a reliable opinion of market value, the property is not acceptable as security for a mortgage deliverable to Fannie Mae.
  
• The appraiser must be consistent when reporting the finished above-grade gross living area, below-grade square footage, and room count. 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 must not change.
  
  
  When using sketching or 3D scanning software, the resulting output must also conform to the ANSI standard. See Exhibits for Appraisals in B4-1.2-01, Appraisal Report Forms and Exhibits for additional information on sketches and floor plans.
  
  
  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.

 

[Fernando]

Before Fannie's edict on ANSI, I dealt with basements my own way (along with other appraisers). It worked for decades and now Fannie forcing us to do it in a standard way doesn't make sense.
Each property is unique and appraisers should decide best way to proceed. Otherwise we're just bean counters.

 

[MoistMitten]

You would call the whole house a finished basement? The phobia is that you would have to put 0 rooms, 0 bedrooms, and 0 baths above grade with 0 GLA. It has nothing to do with the valuation, it has to do with how FNMA wants it reported.

That was my other concern, but that "ansi GXX001 exemption" seems perfect if it gets challenged. Thanks everyone for your input!

 

[Dublin ohio]

This would require GXX001. No level is completely above grade. The important part is that the appraiser compares apples to apples when possible