This is a very common question when we talk with our clients, so we thought we would share what we found on Realtor.com about finished versus unfinished basements. Enjoy!
This is the tale of two basements in otherwise comparable houses. One is a finished basement with a den, bedroom, and full bath. The other basement has some sheet rock, an exposed toilet, and a painted floor. The listing for the first house reflects the basement in the total square footage, and in the price. The second house only includes the square footage of the main floors. So, which listing is correct? The short answer is both.
As a general rule of thumb, a finished basement typically doesn’t count toward the overall square footage, especially if the basement is completely below grade—a term that means under ground level. What is included ultimately depends on which state you live in. Your local county assessor’s office determines if basement square footage, finished or unfinished, can be counted as part of what’s known as the “gross living area.”
For the states that do allow the addition of a basement in the overall square footage of a home, there must be an egress and ingress. This means a door you can walk out of to yard level on one side of the basement, says Sharon Chambers-Gordon, a real estate agent with Windermere Professional Partners in Gig Harbor, WA. Also known as a walk-out basement, these square footage calculations are done based on how much of the basement is above grade.
How basement square footage affects your mortgage
The overall square footage of a home factors into an appraisal and, therefore, the financing of a house. The home has to appraise for the sales price, or higher, in order for the lender to provide the funds. Here’s what mortgage giant Fannie Mae has to say on the basement matter: “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.”
How basement square footage affects your home value
Unlike commercial real estate, homes are generally not priced strictly on square footage. So whether a basement counts as square footage or not, a nicely finished basement generally adds to the value of a home, says Carrie Abfall, a real estate agent with RE/MAX Real Estate Professionals in Columbus, IN. While the price per square foot for a swanky basement isn’t typically as high as main-level upgrades, the home’s value will certainly increase by adding in the additional living space. This is true whether the basement is a walk-out or below grade.
If the home with the finished basement wows a buyer, it may fetch a higher price, says real estate agent Randy Elgin with Keller Williams Realty in San Antonio, TX. Elgin advises to offer what you think is reasonable based on the home’s gross living area plus some fair amount for the finished or unfinished basement. Focus on the usable space and how much value you will gain from it. And include an appraisal contingency in the offer. That way you can back out if you are wrong about the market value.
This article was on Realtor.com and written by Margaret Heidenry. She is a writer living in Brooklyn, NY. Her work has appeared in The New York Times Magazine, Vanity Fair, and Boston Magazine.