Finishing your basement will certainly add value to your lifestyle and family enjoyment. However, your finished basement will not add an equal amount of value as the above grade square footage in your home. The term “above grade square footage” means square footage in the home that is above the ground.
Fannie Mae sets the guidelines that appraisers use when valuing homes, and their guidelines do not allow for the same value to be applied to finished basement areas. This is important when you’re comparing the value of your home to other homes in order to come up with a marketable price. You’ll want to make sure you’re comparing to homes that have above grade square footage equal to your home, and also have a finished basement.
For example, my home is a ranch with 1,500 square feet on the first floor with an 800 square feet in the finished basement, a total of 2,300 square feet. I would not compare this home to a ranch with 2,300 square feet all above grade. There is some confusion in the industry, and some realtors choose to include the lower level below grade square footage when marketing a home, which can cause confusion and disappointment when consumers visit those homes.
If you’re searching for a home to purchase or marketing your home for sale, be careful regarding the square footage. If you follow the guidelines, you’ll have no surprises or disappointed buyers looking at the home and especially when the appraiser comes to value the home.
If you’d like a copy of the current year’s Cost vs. Remodel Value for New England Area Homes Report contact us. We’ll be happy to send it to you right away to help you make some great decisions before you begin a home remodeling project.
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