When Does a Basement Room Count as a Room?

[Peter LeQuire]

My wife and I bought a three bedroom home several years ago. The home had a partially finished "walk-out" basement. By "walk-out", I mean to say that our house is built on a hill; our back yard is downhill, so the back of our basement has a normal door and windows facing our back yard at ground level. We finished a bedroom in the back of the basement: complete with a closet, electrical outlets and overhead lighting, a duct to the central air and heat, a door, carpet, and a full window. I was told by do-it-yourself'rs that these details would turn my three bedroom home into a four bedroom home. So we went to refinance. The mortgage company required us to pay for an appraiser of their choosing--not an FHA loan, but a loan that follows FHA guidelines. The appraiser spent less than three minutes in our house: literally walking into each room, snapping a picture, and walking out. I think her boyfriend was waiting in the car. She saw the partially finished basement (no drop ceiling yet, but electrical, sheet rock, and paint) and snapped a picture of the basement bedroom. We asked specifically about the bedroom: if it would count as a bedroom or not. She gave us an answer that amounted to "maybe." Now we have the appraisal and our house is listed with the original square footage it had when we bought it--no square footage coming from the basement and listed with only three bedrooms. So all the comps on the appraisal are three bedroom homes--and none of these houses have basements finished or unfinished. Consequently, we can't refinance because the appraisal is too low. So my questions are: Are there guidelines for what constitutes a bedroom and when a basement gets counted in the square footage of the house? If so, are these federal guidelines or do they very from state to state? And is there a website somewhere where I can look this stuff up? My gut reaction is that we were hosed by an appraiser who was in a hurry to collect her pay, but I'm no expert. So I turn to you guys. Thanks, Buyer in VA.

Above and below grade areas are treated differently, and separately. If the appraisal does not acknowledge the finished below grade area (and any unfinished below grade area) it is significantly flawed. The presence of that area doesn't necessarily mean that it has value, but whether it does or not it needs to be analyzed and its effect on value dealt with in the report.

That said, it is proper methodology (from what you've described) for the below grade bedroom not to be included in the above grade room count, for purposes of developing the appraisal. It is not proper to add that room to the room count as a bedroom or to add the finished area to that of the above grade living area. (For what it's worth, a room with no finished ceiling is not a finished room -it's partially finished.)

And, unless the appraiser happened to have appraised your house at some point in the past, I'd question the adequacy of the viewing of the property.

http://www.ansi.org/ is the address of the organization that publishes generally accepted standards for how houses are measured, though there are certain areas in which local custom may differ.

I agree with Tony V about sources for house value information - the casual way in which non-appraisers (and some purported appraisers) wander through houses rattling off how much value is "added" by various "improvements" would be a joke except that people are actually deceived by some of the information put out. "Flip This House" might be good entertainment, but its real estate advice is lousy.

 

[Debra Sampson]

Was there any discussion in the report about the project being in progress? Is the bedroom complete with ceiling and floor covering?

Others have explained about above vs below grade but if this appraiser did not provide other comparables with basements there is definitely something that needs to be reviewed there.

 

[Walter Kirk]

You may have a finished room in the basement but calling it a bedroom might cause problems. If the "bedroom" doesn't have convenient access to a bathroom you have functional obsolescence. If there arn't two methods of egress you might have a hazardous situation. You must also consider natural light and ventilation.

In addition to these considerations your market may not pay a premium for four bedroom houses. The finished area should have been addressed as basement finish.

 

[Terrel L. Shields]

Is there any part of this you posters don't understand??? It's in the basement. It is not counted as GLA. period, end of story.

A walk-out basement with finished rooms would not be included in the above-grade room count.

Google up the FHA handbook. 4150.2 Screw ANSI. If it is an FHA loan, then FHA guidelines apply.

A. GROSS LIVING AREA​

Gross Living Area is the total area of finished, above-grade residential space. It is calculated by
measuring the outside perimeter of the structure and includes only finished, habitable, above-grade
living space. Finished basements and unfinished attic areas are not included in total gross living
area. The appraiser must match the measurement techniques used for the subject to the
comparable sales. It is important to apply this measurement technique and report the building
dimensions consistently because failure to do so can impair the quality of the appraisal report.​

B. BASEMENT BEDROOMS, BASEMENT APARTMENTS​

As a rule basement space does not count as habitable space. If the bedroom does not have
proper light and ventilation, the room can not be included in the gross living area. The following
requirements apply to the valuation of below-grade rooms:
o The windowsill may not be higher than 44 inches from the floor.
o The windowsill must have a net clear opening (width x height) of at least 24 inches by 36
inches.
o The window should be at ground level; however, compensating factors may allow less.
In all cases, use reasonable care and judgment. If these standards are not substantially met, the
basement area cannot be counted as habitable space.​

Basements are not GLA and only count as other habitable space if the standards above are met.