When you marry GLA with a Daylight Bsmt?

[prasercat]

I appreciate the responses, it certainly helps.

Now I'm leaning more to just leaving it the way I have it, with a whole in the GLA where the family room is, and factor in the design attributes of the family room in a line-item.

In order to avoid putting the family room footage in the GLA and then explaining all over the report why I did that, I would need to estimate the value impact of the family room configuration as a line item or other items; such as, on the quality or style line to compensate.

However, this would be hidden (adjustments aren't made to the subject on the grid), since it would only be evident in the adjustments relative to the other comps. Therefore, I will need to explain it below the grid; such as, the subject had a higher overall quality rating per square foot basement area due to the configuration of the basement family room ceiling extending to the ceiling of the first floor, etc., which was then factored into an overal quality adjustment for the entire home.

The only target I am trying to hit is the actual selling price when the subject finds a buyer in the future (this home was never marketed and it is not under contract). I follow up on each of these sellers, where there is no contract and has been no marketing, to see how close my estimated value is to the actual net sales price - they hire me to set a sales price, although I explain in an attachment regarding the difference between the estimated value and marketing and some things to consider before deciding what price to list at, which is rarely the appraised value!

My goal is to be within 2% to 3% percent on these custom homes, although I can't say it has been 100% of the time, it has been most of the time. It is these appraisals for sellers that constitute EVIDENCE that my appraisal methodology is sound, should I ever be challenged in this regard - If someone thinks they have a better approach, they'll have to prove it statistically against my results.

The problem I'm having is that I see the public reacting to this family room much more closely to the GLA in the subject than the daylight basement in the subject and how to represent that in the analysis within its limitations and constraints.

 

[prasercat]

You are doing his for the seller. The seller will expect the report to conform to what will happen when the home sells and the appraiser comes in from the lender.

So, you have several expectations. First is the GSE guidelines. Second, is how the public and the market treats the home. You will have to weigh these expectations and make a decision. Whichever way you go, support your decision. The knee-jerk reaction is that the lender's appraiser will treat the below grade family room as a basement, so that has to be a significant part of your decision tree.

A good "global" perspective on the issue and a very good point!

 

[Jim Onderisin]

What upper and lower level areas? Hillside houses are tricky. Some have kitchens in the lower levels. How would that change anyone's opinion?

 

[Meandering]

I agree with Restrain and Mike.

Even though your assignment does not require you to use GSE reporting guidelines, you sure as heck can be confident that no amount of explaining the difference will ring any bells with a non-appraiser, and they will compare what you say with what any lender's appraiser says, and if you include the basement in GLA, you know they are going to make out like the other appraiser is wrong and under valuing their home.

Appraisers always seem to have this issue, only when, the below grade space appears in the minds, or in their markets to be worth as much as the above grade space.

If the above grade is worth a $100 a square and the below grade is worth a $100 a square, it's still worth a $100 per square regardless to where the finish space is located. However, the GSE and Government insured loans mandate the spaces be reported separately.

Why do appraisers consistently question this concept? It's the same value, just reported on different lines of a form. You could narrate the whole thing and say that finished space above and below grade is worth $100 a square and not have this issue, but because you are questioning whether to include obvious below grade space in GLA, it's evidence that you are going to report on a form..

Could anyone imagine when below grade space could be worth more than above grade space? Like maybe if they built basements in New Mexico, that would be a whole level that did not need air conditioning. Would appraisers be wanting to call the below grade space GLA and the above grade space as basement? Or would they be trying to report the below grade space in the energy efficient line?

Use ANSI, state you used ANSI. State that appraisals for lending require the separate reporting of the areas of the space. State that Fannie has a caveat to report below grade space as a combination of above and below when the "market perceives them the same" but also state that market perceptions change over time, so in order to be consistent with recognized appraisal reporting methodology, you have reported the two types of spaces on their respective line item lines, which should ensure consistency with any future appraisals of the subject property.



Not rocket science.


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[prasercat]

I agree with Restrain and Mike.

If the above grade is worth a $100 a square and the below grade is worth a $100 a square, it's still worth a $100 per square regardless to where the finish space is located. However, the GSE and Government insured loans mandate the spaces be reported separately.

Why do appraisers consistently question this concept? It's the same value, just reported on different lines of a form. You could narrate the whole thing and say that finished space above and below grade is worth $100 a square and not have this issue, but because you are questioning whether to include obvious below grade space in GLA, it's evidence that you are going to report on a form..

Could anyone imagine when below grade space could be worth more than above grade space? Like maybe if they built basements in New Mexico, that would be a whole level that did not need air conditioning. Would appraisers be wanting to call the below grade space GLA and the above grade space as basement? Or would they be trying to report the below grade space in the energy efficient line?

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This is a very general treatment of an unusual design affecting only a part of the GLA and daylight basement. The only part of the basement that would be worth close to GLA in the market should be the family room, since it extends to the first floor. That means, that the rest of the daylight basement has a lower value - you can only have one value per square foot for the basement finish and gross areas, you can't disect a space in the basement. If you gave it an overall value, the problem is it wouldn't apply to the comps, so that approach is useless.

The fact is the subject family room is not purely GLA or basement and to stick to this idea is the denying the differences that exist. Not one person has addressed how they would handle a house that was one story, on slab, with 17-19' vaulted ceilings that was below grade at the back of the house, on grade in front of the house. That's all. You are saying essentially, that this is staight forward in your mind; namely, the market would perceive that such a home has no GLA and the entire house is a basement.

I'm sorry, I think this rigid approach would be leading to the wrong answer, not everything fits into nice neat categories. We aren't the definition police, we are those that predict market reaction.

I'm not denying this is a can of worms, but it is what it is and it isn't purely one thing or another and THAT is what needs to be recognized with some sort of adjustment or different way of handling the footage that isn't exactly one way or the other.

While I stopped engaging in the practice of putting daylight basements into GLA after I left my apprecticeship many years ago (which involved mostly high-end custom mountain resort homes with daylight basements --most with 9' to 10' ceilings), it is widely practiced by both realtors and appraisers in many mountain communities. In my past analyses, I found that it was too inaccurate an approximation and resulted in less congruity in my sales grid adjusted values on average, so I dropped it. The point is, it is not like it hasn't been done - it's being done all the time (just not by me or you).

The value of GLA vs a daylight walkout basement can only be know for a specific home, some homes have daylight walkout basements that are many times the value of GLA for other homes. It just so happens, that in this home, I believe the value of the subject family room (that extends from daylight basement to first floor) would be similar or slightly less than the value of the rest of the GLA in this particular home. Therefore, a logical approximation could be made by inclusion of the Family room in GLA mathematically (and with a detailed explanation of why this was done); however, as you and others have stated, this creates other conflicts - which I agree exist.

I've decided on presenting the floor levels and square footage as they exist physically and adjust for the difference on the quality line. The quality enhancement would be similar to the differential between the value arrived at for the daylight walkout area for the subject (not including the family room) vs subject's value for GLA, then applying that differential over the square footage of just the family room., which is about 320 sq.ft. X $Y, where the $Y, would likely be close to $15/sq.ft.(I haven't worked that out yet). Anyway, it will likely amount to a $4,500 to $5,500 quality adjustment.

 

[Meandering]

This is a very general treatment of an unusual design affecting only a part of the GLA and daylight basement. The only part of the basement that would be worth close to GLA in the market should be the family room, since it extends to the first floor. That means, that the rest of the daylight basement has a lower value - you can only have one value per square foot for the basement finish and gross areas, you can't disect a space in the basement. If you gave it an overall value, the problem is it wouldn't apply to the comps, so that approach is useless.

You don't have comps with partially finished walk out basments? Or is the issue that this basement has a 19 foot ceiling?

The fact is the subject family room is not purely GLA or basement and to stick to this idea is the denying the differences that exist. Not one person has addressed how they would handle a house that was one story, on slab, with 17-19' vaulted ceilings that was below grade at the back of the house, on grade in front of the house. That's all. You are saying essentially, that this is staight forward in your mind; namely, the market would perceive that such a home has no GLA and the entire house is a basement.

I did not say the market would preceive anything. I said that the reporting requirements are clear, ANSI is clear. I said that you could have used a narrative report and made the whole thing very clear, but you are trying to justify the line item distinctions for something that you're not comfortable utilizing the line item distinctions. Again, it's up to you to choose the scope of the work, and it would appear that a unique home would be better suited to a narrative report than a form report designed for cookie cutters.

I'm sorry, I think this rigid approach would be leading to the wrong answer, not everything fits into nice neat categories. We aren't the definition police, we are those that predict market reaction.

I could not agree more. However, you must wite the report for the intended use and users, so must therefore recognize that as "sellers", at some point they are going to compare your report to any lender's report and you should explain the differences to them, or, maintain consistency with how a lender's appraiser is going to report the subject.

I'm not denying this is a can of worms, but it is what it is and it isn't purely one thing or another and THAT is what needs to be recognized with some sort of adjustment or different way of handling the footage that isn't exactly one way or the other.

I'm not seeing why you are wrestling finished below grade space, other than that it has a 19 foot ceiling, which adds, nothing to GLA, sucks the heat out of the room, and is more a quality concern as structurally, the building needs more support for the space above, then if it had 2 conventional 8 foot ceilings instead of one 19 foot ceiling. I think the problem is you are confusing GLA and basements with quality issues.

The value of GLA vs a daylight walkout basement can only be know for a specific home, some homes have daylight walkout basements that are many times the value of GLA for other homes. It just so happens, that in this home, I believe the value of the subject family room (that extends from daylight basement to first floor) would be similar or slightly less than the value of the rest of the GLA in this particular home. Therefore, a logical approximation could be made by inclusion of the Family room in GLA mathematically (and with a detailed explanation of why this was done); however, as you and others have stated, this creates other conflicts - which I agree exist.

Don't take this wrong, but the value of the finished below grade space must be supported by the market. Not from what you believe, and is an even better reason to not add the lower level room into the GLA, because it will skew what is suggested by the comparables. You absolutely need at least one comparable with a high quality finished lower level room to compare to your subject.

I've decided on presenting the floor levels and square footage as they exist physically and adjust for the difference on the quality line. The quality enhancement would be similar to the differential between the value arrived at for the daylight walkout area for the subject (not including the family room) vs subject's value for GLA, then applying that differential over the square footage of just the family room., which is about 320 sq.ft. X $Y, where the $Y, would likely be close to $15/sq.ft.(I haven't worked that out yet). Anyway, it will likely amount to a $4,500 to $5,500 quality adjustment.

I think that's a good move. But if it were me, I would have produced a narrative report.

Good luck to you.


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[prasercat]

I'm not seeing why you are wrestling finished below grade space, other than that it has a 19 foot ceiling, which adds, nothing to GLA, sucks the heat out of the room, and is more a quality concern as structurally, the building needs more support for the space above, then if it had 2 conventional 8 foot ceilings instead of one 19 foot ceiling. I think the problem is you are confusing GLA and basements with quality issues.

I'm comfortable with the quality and market appeal (market reaction) of the basement family room. While I bet less than .01% of appraisers actually measure ceiling heights in homes to determine quality differentials, I do, because it does matter to the buying public and to quality. It's too complex a subject to address herein.

However, if you want to make a replica of the subject family room with 17' up to 19' vaulted beams ceilings with a roof, walls that are as high as indicated on four sides, with a wall of windows, let me know if that comes out less expensive or more costly than if you just built the family room in the basement using the first floor for the cieling.

If you took out the first floor entirely, that daylight basement with high roof and walls would not be cross comparable to a daylight basement for any comps until you recognized the quality inherent in that design when making adjustments.

In an unfinished basement, the only thing you pay for to finish the cieling is the drywall with finish and some wiring and canned lighting, you are able to save a lot of money because the structure of the first floor provides the ceiling structure- it is already there. If you want a roof over your basement, then you not only have to pay for the drywall with finish and some wiring and canned lighting, but you have to install the entire roof structure supporting your ceiling and roof, then put on sheething above that, and then the roofing materials. The added cost for this average quality structure is easily 15 to 20 dollars more per square foot without making the walls above 8 feet. It generally costs 3% more per base square footage costs to build each additional foot above 8 feet high, and at an average of 18 feet ceiling height, that comes to 30% more expensive, so add 30% to the base costs and then the added $15 to $20 cost per square foot for the roof and you get the added quality differential, which could easily be more than double the cost per square foot of the rest of the daylight basement. This is why it is a very different space than the rest of the basement.

Don't take this wrong, but the value of the finished below grade space must be supported by the market. Not from what you believe, and is an even better reason to not add the lower level room into the GLA, because it will skew what is suggested by the comparables. You absolutely need at least one comparable with a high quality finished lower level room to compare to your subject.

There won't be any basements with roofs in comparable properties found. Roofs are normally associated with GLA.

I'm quite confident I can interpolate this one from my experience with GLA and Daylight Walkout basements. We are paid to fill in the dots, but we can connect the dots too. I'm sorry you give so little credence to what is "belief" and why an appraiser would "believe". Every appraisal I do is supporting the adjustments I make, which is support from the market; and I do have a memory. If the market doesn't support an adjustment, I'll uncover it, eventually. In unique situations, you have to make judgements with the data at hand.

Thanks for your input, it was all helpful and I made my decision.

 

[Terrel L. Shields]

Don't take this wrong, but the value of the finished below grade space must be supported by the market. Not from what you believe, .... You absolutely need at least one comparable with a high quality finished lower level room to compare to your subject.

But in the absence of such data what do you fall back on?

I think you can try to analyze a series of "end point" properties to bracket the property features as best possible in the event you have no "matched pair" to rely upon.

If you are comfortable with your assessment then make sure to double back and take a second long look and try not to let your biases create a problem. For me, it has stairs. I have bad knees and lots of Arthritis to go with it. Every multilevel dwelling is something I personally would never buy, no style nor variation thereof appeals to me. In fact, I would be reluctant to buy any house that had more than 2 steps from ground to floor level. But that's just me. What does the market think? That's the focus.

 

[prasercat]

But in the absence of such data what do you fall back on?

I think you can try to analyze a series of "end point" properties to bracket the property features as best possible in the event you have no "matched pair" to rely upon.

If you are comfortable with your assessment then make sure to double back and take a second long look and try not to let your biases create a problem. For me, it has stairs. I have bad knees and lots of Arthritis to go with it. Every multilevel dwelling is something I personally would never buy, no style nor variation thereof appeals to me. In fact, I would be reluctant to buy any house that had more than 2 steps from ground to floor level. But that's just me. What does the market think? That's the focus.

Yes, those are valid points. I will definitely try to bracket from every angle possible and it will have to be "end point" properties, as you describe.

Your physical concerns are definitely not uncommon, and certainly a consideration. The market is not particularly elderly and most people moving up into the mountains have to deal with snow and four wheel drive cars, so it isn't a market particularly attractive to those with physical limitations, which should reduce the significance of the stairs in regard to utility or functionality.

The house has other issues, but that is beyond this thread; such as, it is a considerable underimprovement, and a I believe a significant number of buyers would actually put in floor joists and fill in that area so they didn't need to go down and up stairs to get from the family room and back to the kitchen and master bedroom and entry. The GLA of the house will most likely be expanded by the next owner, it is just too small for the location.

The quality adjustment I'm contemplating recognizes the extra value of the roof and wall area (high ceilings) above the basement family room (since there is no floor - GLA footage there) and if someone fills in the floor area to cover the opening (except the stair), then that roof and wall area will then be assigned to the value of that GLA, which will be comparable to the rest of the home's GLA and the basement family room's value with drop to that of the other parts of the basement. So, there is a conservation of value principle; if I may call it that; the value will just be spread around differently if the opening is filled-in. Naturally, the floor structure will then add additional value (and a degree of utility) to the entire house, because there will be both a family room and basement family-recreation room.

I have a few daylight walkout basement homes that are also "quirky" in design and dated, but these comparisons are no easy task. It's like tunneling through a mountain with a spoon. Comparable sales are few.

 

[Carnivore]

I have a few daylight walkout basement homes that are also "quirky" in design and dated, but these comparisons are no easy task. It's like tunneling through a mountain with a spoon. Comparable sales are few.

I see the larger issue to address is the market reaction to the quirky basement and its effect on the overall improvement. The property probably does not conform to a broad market because its so unusual. If it is indeed quirky then your pool of buyers is limited. The few potential buyers makes for hyper-extended market times and a lower sales price.

Cost approach will not be very helpful because quirky improvements cost more to build. Also, land value ratio may be excessive for a GSE/FHA/VA loan. All issues that underwriters must decide upon with the help of your appraisal.

So is your subject eligible for FHA, VA, GSE loans? My guess is NO! You will have to address that question in your report.

One reason the GSE's and FHA(not so much VA) got in trouble during the downturn is because they made many loans on ineligible properties. Many appraisers did not highlight in there reports those facts or conditions that would lead a UW in the correct direction.

just my 2 cents