Whether finished or unfinished, the presence of a basement will almost always have an impact on the overall value of a home. Here are six basic, but critical, rules for appraising basements. As you consider the value of basements, keep these important steps and quick tips in mind.
1. Separate basement from finished area
Separate the basement from the above grade finished area. Any portion below the ground is considered a basement.
2. Do not roll basement into total square footage
Do not roll the square footage of the basement into the total square footage of the home. Price the square footage in the basement differently than the square footage of the rest of the finished space. The above ground space is worth more. For example, if two homes have the same square footage overall, including basements, but one house has more square footage above ground than the other, that house is worth more.
3. Distinguish between finished and unfinished
Divide the basement into finished and unfinished areas. The finished area of the basement is not included with the finished area of the main level because the areas are valued differently.
4. Research your location
The value of basements varies from place to place, so do your research to determine how much value a basement brings to a subject property, given the location and what the average buyer is seeking.
5. Use comps with finished basements
Use sales and listings in your comparative market analysis that have finished basement areas. Start with the neighborhood in which the subject property is located. If you can’t find recent sales, move to nearby neighborhoods that are similar, for example, in the same school system or close to a major highway.
6. Use recent comp sales
Stick to sales within the past 90 days. If none are available, then consider older sales. Start broad and then refine until you find very similar properties. If possible, use MLS to search properties, as it provides a great deal of information and allows you to clear out properties that you don’t want to include in your analysis.
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