Investor · Mechanicsburg, PA · Member since 2017 · 110 posts · 50 votes
Hello BP'ers, A quick question for you all geniuses - Is the bedroom in a walkout basement (below grade of course) with egress (conforming requirements) and and a closet, considered while determining comps? I probably know that Realtors see it as a legal bedroom and will advertise as such, but will an appraiser consider it while pulling comps of the property?
Real Estate Agent · Manassas, VA · Member since 2013 · 118 posts · 63 votes
9y
@Amit G. I am 100% on board with @Chris Mason - you will not see the basement bedroom counted in the gross living area on the appraisal because they only count above grade rooms. However, they will (should) compare it to other homes that also have a bedroom in the basement. Same goes for bathrooms in the basement.
I have actually had a listing that was a 3 level townhome - you walk in on the lowest/3rd level. There was a full bedroom and bathroom on that level (main level). Then you walk up to the 2nd level where the kitchen and living rooms were. Then the 3rd level had 2 more bedrooms. No part of this home was below grade - it was built on a concrete slab - 100% above grade. When the appraiser did the appraisal, they would not count the bedroom on the main level! I was shocked. Their reasoning was "it's below the kitchen so it doesn't count." I have spoken to several appraisers since and their opinions on that are all different.
For as many regulations as the real estate industry has, the appraisal is one thing that seems to have been under regulated. I guess because it is just an opinion of value. Either way, it's very frustrating.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
9y
@Amit G. and @Chris Purcell I just had my house appraised for a HELOC. There are three bedrooms above grade and one bedroom in a walk out basement. The basement also has a family room, wet bar and office. The above grade square feet is was higher value than the basement, but the finished square feet in the basement was given higher value than unfinished. For that reason I can say with certainty in my part of the country, a finished basement adds value to the appraisal.
The appraiser used comps with walk out basements that also had finished square feet in the basement.
As far as bedrooms, one of the comps had two bedrooms finished on the main floor and two finished in the basement. Mine has three finished on the main floor and one in the basement. The appraiser gave me +$5000 for having the extra bedroom on the main floor. This makes sense because it is more desirable.
I also own several SFH that were purchased as rentals. The appraiser did both an income based approach and standard appraisal. The bank required this since they were purchased as rental property.
Some of the varying answers could be regional differences. In California, basements are less common than they are in other parts of the country.
All my appraisals magically come within $1000 of the sale price, even when I am getting an incredible deal. The comps they pick are built around the price they want to support. In other words, they pick the price then find comps to support it, not the other way around. Their job is just to make sure the bank can sell it for what you paid, so there is no incentive for them to value it over purchase price.