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.
Does a basement count toward overall square footage?
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.
The home-buying process is a high-stakes thrill ride full of exhilarating ups and scary downs, but unquestionably one of the most deflating moments is when the appraisal comes in significantly lower than the accepted offer. This is, to use technical real estate lingo, “a bummer.”
Either you feel as though you got the raw end of a deal by paying more than the property’s worth or, if you don’t have extra cash to hand over, the deal can crumble into dust. (Your lender’s not going to fork over money for a higher loan amount if the appraisal came in lower than expected, so you’ll have to make up that difference yourself.)
“In a rising market, low valuations are pretty common because appraisals are based upon sales that closed when prices were lower,” says Diane Saatchi, a senior broker with Saunders & Associates in Bridgehampton, NY. “The reverse is so in a declining market.”
In other words: Appraisals can’t keep up with how quickly homes are selling in a hot market, so you’re bound to see lower-than-expected values placed on homes.So, what do you do if this happens to you? You have four options:
1. Appeal the appraisal
Sometimes called a “rebuttal of value,” the appraisal appeal takes some work. In fact, it’s a total team effort.
That means everyone puts on their best Sherlock Holmes garb and gets to work looking for anything that helps the claim for higher valuation. Perhaps the appraiser overlooked some comps (homes similar in style, location, and square footage sold within the past few years).
“It’s not uncommon to discover, for instance, that the appraiser used a comparable sale that looks like it’s in great condition, when in fact the home was trashed when purchased and has already been rehabilitated,” Fleming says.
The loan officer writes an appeal using the new comparables and then sends it to the appraiser. There might be some negotiating back and forth until all parties come to a compromise with a new valuation.
Spoiler: It’s a hard battle to fight.
“My record on this one is 0 for 9 so far,” Fleming says. “But I know many appraisers personally who have adjusted their values.” So keep the hope alive!
2. Order a second appraisal
“Most often, if the appraised value is not as high as the agreed (contract) price, the seller’s agent will ask to see the comps and get a second or third appraisal,” Saatchi says.
But it will likely cost you–you’re not only paying for the first appraisal (in your closing costs), but you’ll pony up for any additional appraisals as well. They can range between a few hundred dollars and $1,000 depending on the area. Occasionally, real estate agents or sellers will foot the bill if they really want to keep the sale.
3. Negotiate with the seller
If you’re lucky, you and the seller will both budge a little.
“You might go back to the sellers and ask them to reduce the price or split the difference,” says Peter Grabel, managing director of Luxury Mortgage in Stamford, CT. “The seller is under no obligation to do so, but they may prefer to do this rather than take a chance of losing you as a buyer, and starting over again. It is likely that another buyer will have the same issue, so the seller might be better off renegotiating with you unless they have other offers.”
Sellers might be more willing to cooperate, especially if the Federal Housing Administration is involved. Lenders often require the use of their own FHA-approved appraiser, and these appraisals are “locked in” for six months.
“The seller could be forced to take a poor appraisal or wait it out for a buyer with a different loan,” explains Joshua Jarvis of Jarvis Team Real Estate in Duluth, GA.
Jeff Knox, broker and owner of Dallas-area real estate firm Knox & Associates, says this is the most common outcome in his area.
“Of all possible outcomes, this is what happens most frequently,” he says. “While the seller will usually be upset about the low appraisal value, most reasonable sellers eventually come to terms with the fact that any other appraisal values by potential future buyers will most likely come in at about the same value.”
4. Walk away
No one wants to let a property slip through their fingers, especially if it feels like their dream home. But beware of ignoring a low appraisal—you could end up losing thousands whenever you decide to sell.
If you have an appraisal contingency in your contract, you can walk away, get your deposit back, and hope for better luck the next time around.
This article was written by Maureen Dempsey for Realtor.com. She is a writer who covers fashion, beauty, lifestyle, and home decor. She’s recently learned that decorating her new home is just as satisfying as filling her closet.
We wanted to share this article from Realtor.com written by Audrey Ference about who pays the real estate fees.
For both buyers and sellers, the help of a knowledgeable broker is valuable, but who pays for the services of the real estate agent? If you’re about to start your home-buying journey, you’re likely thinking about hiring a real estate agent. Buyers and sellers are responsible for paying for different fees, so it’s important to know best practices for a typical home sale.
Here’s what you need to know about real estate agent commission and how much cash you can expect to contribute.
Who pays the real estate agent?
Standard practice is that the seller pays the real estate commission of both the listing agent and the buyer’s agent, according to Ruth Johnson,a Realtor® in Austin, TX. But she also points out that “while sellers pay the fees, they usually wrap them into the price of the home.” In that sense, you could say the buyer pays the fees.
“It totally depends on how you look at the situation,” she says. Fair point!
How much are real estate agent fees?
A common commission for real estate agents is 6% of the purchase price of the property. The fee is paid at closing by the seller, unless some other arrangement has been made.
All of the details about a real estate agent’s fee should be in the agreement you sign when you hire an agent—don’t be afraid to ask questions if there’s anything you don’t understand.
Generally, things like photography, the cost of listing the property, and the cost of any printed materials or signs are included in the fee, along with the real estate agent’s services, of course. If you have to do major staging or repair work, those costs will come out of your pocket.
Can you negotiate real estate agent fees?
A seller can negotiate the terms of the listing agreement—which contains the real estate agent fees—with the brokerage or agent.
If a buyer is in a tough seller’s market or bidding war, offering to pay some or all of the real estate agent’s fees can be a way to stand out from other offers. In fact, even though the buyer usually pays most of the closing costs, they are up for negotiation, too. That’s one of the many things a good agent will do for a buyer—make sure you get the sweetest deal possible.
Who pays the rental agent’s commission?
Rental agents work differently from purchase agents. It’s up to the landlord and the tenant to decide who pays the rental agent’s fee. Broker fees for finding you a rental generally fall between one month’s rent and 15% of the annual rent of the property.
In some situations, the landlord pays the broker to help him find a desirable tenant. But in other areas, like big cities with large rental populations, the renter will be required to pay the broker fee, even if the landlord hired the broker.
Customs vary widely by location, so always make sure you clarify who is going to pay for what, and how much it’s going to cost, before you agree to work with a rental agent.
Audrey Ference has written for The Billfold, The Hairpin, The Toast, Slate, Salon, and others. She lives in Austin, TX.
Let’s face it, we all don’t have great taste. Some of us have better taste than others, and then there are those of us that have an amazing sense of color and decor (I wish I was one of those people). You might love a bright purple in your living room but would a potential buyer? Today, on Realtor.com, Lindsey Cambell writes about what colors help or hurt your potential home sale.
When decorating a home it’s easy to appeal to your own personal taste: A kitchen painted your favorite shade of red, or a brightly colored statement chair in your living room, can instantly make a new house feel like home.
But, if you’re ever planning to sell your home, you should know how your color choices now will affect a buyers view of your home later.
In a recent survey by Better Homes and Gardens, 400 homeowners were polled on the colors they’re most and least attracted to. The results showed strong preferences—not just for color in general, but also for how and where each hue was used.
Here are a few takeaways to keep in mind:
Avoid these three colors
Orange, black, and violet: Of the homeowners polled, 58% said they’re least likely to decorate with orange, claiming it’s “way too loud.” Black and violet followed, snagging the second and third spots on the list of colors homeowners would rather live without.
A fan of these condemned tones? Well, we’re not saying they’re banned.Just try to limit them to small surfaces and keep them off your walls—they can be overpowering for buyers.
Don’t oversaturate your interior
When it comes to color, the biggest fear among homeowners (read: your potential future buyers) is that they’ll get sick of the color they’ve chosen. That means if you’re going to use saturated hues, you’re going to want to see them limited to certain rooms and decor.
Those polled ranked the living room (63%), kitchen (53%), and bathroom (52%) as the top three spots where color is most likely to be used. In other spots, you’ll want to go easy on the saturated shades—specifically, the foyer (36%), dining room (24%), and adult bedroom (24%).
Think accent, not statement
When it comes to buyer-friendly decor, you can still use the colors you want, but small doses are best: 41% of participants preferred using color as an accent throughout the home.
We think you know what this means. Leave large surfaces—walls, floors, and ceilings—neutral to act as a backdrop for your furnishings and accessories. When it comes time for a walk-through or open house, the potential new owners can imagine their life and belongings in the home without being overwhelmed by your design.
Have a penchant for color but afraid of the consequences when you go to sell? Take that personality to the exterior of your home and opt for a front door in a shade other than white.
Bringing a touch of color to the front of your home will feel welcoming. But keep it to the front door or shutters—only 8% say a bold-colored exterior would be something they’d consider.
Feeling blue is actually a good thing
When it comes to decor, that is.
The calming shade won the most affection from homeowners, with 62% favoring a palette rich in blues. The fervor for earthy hues continues with green as the second favorite; neutrals follow as the most common choice on interior walls.
So, whether you’re hoping your house sells in the next 20 minutes or you’re planning to put it up for sale in 20 years, you should consider the consequences of your color choices.
During your time in a home, decorate for yourself (and enjoy it!). Opt for a throw or a bright piece of artwork to add personality to neutral-colored rooms. And, if you so dare, paint a room in a bold shade—just be ready to repaint or tone it down with neutral furniture when it’s time to move on.
Lindsey Campbell is a writer living in Brooklyn, NY. She is coffee-obsessed and a lover of travel, photography, and all things with color and shine.
Congratulations! You have just closed on your new home and are pulling the moving truck into the driveway, and the last thing on your mind is the yearly maintenance needed to keep your home in great shape. We have found a list complied on Zillow.com by See Jane Drill of DIY maintenance that should be done the first 3 months and then organized seasonally. Enjoy!
First three months
You’ll be busy enough moving in and getting settled, so we don’t recommend taking on a lot of work during the first few months. There are, however, a few things you might consider doing right away:
Change all the locks, and make spare keys.
Implement energy-saving measures right away to save you money on heating and cooling costs:
Hang a clothesline in the laundry room and/or outside to cut down on dryer costs.
Lower the hot water heater temperature to 120 degrees F. This is generally the hottest water temperature that anyone would need, and lowering the temperature prevents scalding accidents.
If you make your home comfortable for kids and pets first, you’ll be comfortable, too! Babyproof and petproof as needed.
We organized the tasks by season, but some items are interchangeable. This is simply a recommendation, so make it work for you!
Install ceiling fans to cut cooling costs, or reverse the direction of existing fans. Run your fans counterclockwise in the warm months, and clockwise in the cool months.
Inspect the roof for missing, loose, or damaged shingles. You don’t always have to climb up there to do this. In some cases, you can do this from the ground with binoculars.
Clean the roof and gutters of leaves and moss.
Fix large cracks in the concrete or asphalt driveways. Do this during warm weather, when you can expect a few dry days for proper curing time.
Inspect air conditioners, and replace the filter if necessary.
Have the fireplace inspected and the chimney swept. You’ll likely pay less for these services by doing it in the offseason.
Clean and repair or replace window and patio door screens.
Seal cracks in windows and doors with caulk or weather stripping.
Drain exterior plumbing, and cover outdoor faucets.
Clean carpets. You can do this anytime, but it’s nice to get it done right before the holidays!
Install a new furnace filter.
Replace batteries in smoke alarms and carbon monoxide detectors. A good way to remember this task is to do it when you set the clocks back for daylight saving time.
Clean the dust from heating vents, and make sure vents are obstruction-free.
Inspect and replace — or add — outdoor lighting around the front of your home and walkways. This helps keep people safe when it gets darker earlier.
Clear drains of hair clogs using a Zip-It drain cleaning tool or a drum auger.
Clean the oven. While you’re at it, make sure all your kitchen appliances are in good working order prior to the holiday season.
Check the insulation in your attic or crawl space, and add more if needed. A good general guideline: have at least 12 inches of insulation in the attic, and up to 16 inches if you live in a region with very cold winters.
Create a family fire escape plan, and do a few fire drills to make sure everyone knows what to do in an emergency.
Keep snow and ice removal supplies on hand, such as a shovel, snowblower, and salt or sand.
Compile an emergency kit for your household with extra water, food, medicines, flashlights, and other necessities.
Clean and refinish (where applicable) decks, porches, and patios to prepare for outdoor living.
Bring out the outdoor furniture, and clean grills so they’re ready for backyard barbecues.
Spring-clean all windows — inside and out.
Plant a tree. This is a fun family activity to do in your new home. Plant the tree strategically for shade in a particularly warm and sunny area of your home.
Once you’ve had the last fire of the season, close the fireplace damper to keep dirt and pests out.
Assess and inspect garden tools and lawnmowers to make sure they’re ready for a new season of working hard in your yard.
Because this is your first season in a new home, take some time to observe your yard before making any major changes. See where the sun shines at different times of the day. Watch which perennials come up at which times. Take notes about what you like about the current landscaping, and what you want to change or add to the landscape.
Most importantly, enjoy your new home! Taking care of these few maintenance jobs will help you love your home for many years to come.
I was looking at Realtor.com the other day and came across this post about how comps are tricking people into thinking their home is worth more or less than what the home is really worth. I thought I would share this article written by Cathie Ericsson. She is a journalist who writes about real estate, finance, and health. She lives in Portland.
“Unlike most things we buy in life, homes don’t come with a sticker price. Sure, the real estate listing may say the price of the home is $320,000, but that’s just a starting point. Buyers can—and should—offer more or less money for the house based on something called real estate comps, short for “comparables.”
Real estate comps are properties that have similar characteristics to the house you’re trying to determine the value of. They’re critical tools used by real estate agents when you’re ready to buy or sell.
Because it’s easier to compare apples to apples, the best comps are houses that are as similar as possible to the one being valued.
But sometimes the comps are incorrect, which makes it hard for you to arrive at an appropriate value for your home. Using comps to determine a home’s valuation is not entirely a science, but there are some signs your real estate comps are not accurate.
Sign No. 1: The comps are far away
When we say location is key in real estate, that doesn’t just pertain to the location of your home. Your comps’ location is important because they take into account the desirability of the school system and neighborhood, among other factors, explains Jon Boyd, broker and manager of The Home Buyer’s Agent in Ann Arbor, MI.
If there aren’t sufficient nearby comps (as can happen if you’re in a rural area), your agent might need to widen the search area. Ideally you’ll look at homes within roughly a half-mile so you are truly comparing houses that are being valued equally.
Sign No. 2: The comps are stale
Markets move fast, and using a comp from a year ago will give you an incorrect idea of home values in your area. Boyd recommends sticking with homes that have sold within the past six months; the more recent, the better.
Sign No. 3: The comps are really appraisals
Does your comp use a strict formula of square footage, bedrooms, etc. to arrive at a market value? If so, that sounds more like an appraisal, which is an entirely different way of determining the value of the home. Be careful not to confuse the data provided by these two documents, warns Molly Stehman, real estate broker with Premiere Property Group in Lake Oswego, OR.
“Comps are totally subjective and a lot of opinion goes into the numbers,” she says. Appraisers must follow rules that standardize the process of determining a home’s value. So when coming up with comps, in addition to objective measures like square footage and number of rooms, Stehman will add factors like whether the home has been updated or remodeled, whether the floors are hardwood or laminate, the walkability score, the age of the roof and furnace, and even what she calls the “charm factor.”
That’s why the picturesque remodel you’re looking at might be priced higher than the plain-Jane house down the street, even if the facts on the appraisal sheet are basically identical.
Sign No. 4: The comps include homes that are still on the market
To be useful, a comp has to tell you what the home sold for, not what the asking price is. The best indicator of a house’s value is what people have paid for it, not what they might be willing to pay (the seller hopes). Be sure your comps contain only homes that are off the market.
Ultimately, the seller or buyer decides how much they want to ask or what they’re willing to offer for a house, Stehman points out. But by making sure your comps aren’t off-base to start with, you can step up to the negotiating table feeling as informed as possible.