Home Buying in Atlanta>Question Details

Joanie, Home Buyer in Norcross, GA

Sales Comparison Appraisal question: When comparing a home with a comparable, how are extra rooms figured in?

Asked by Joanie, Norcross, GA Fri Jan 1, 2010

Our house has 2 bedrooms and the comparable has 3. Also, our house has 150 less sq feet than the comparable. The appraiser deducted 5000 for the bedroom, and another 5000 for the difference in sq. footage. Is this double dipping?

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Hank Miller’s answer
Yikes - it never fails to amaze me how agents continue to have a hard time with this.

Get a hold of the Fannie Mae appraisal guidelines and familiarize yourself with what is considered living area - below grade areas ARE NOT CONSIDERED LIVING AREAS - including PARTIALLY BELOW GRADE. This is an asset, but not considered in GLA.

I have an appraisal section that might be worth a look - http://www.hrmiller.com/atlanta-appraisals.asp

This isn't rocket science.

1 vote Thank Flag Link Wed Jan 6, 2010
Below grade bedrooms would not be listed in your room count, however you should get credit for a partially finished basement with bath.
As far as the double-dipping is concerned, the reason they would deduct for the 2 bedroom and the lower square footage is because of what is considered to be the functionality and appeal of a 2 bedroom vs. a 3 bedroom home. There are more limited buyers for a 2 bedroom. You would be looking for either an empty nester or family with 1 child most likely. This is a much more limited market. Even most young newly married couples want a house with at least 3 bedrooms.
1 vote Thank Flag Link Fri Jan 1, 2010
Thanka Hank, and thanks for the link. I sometimes give appraisal seminars at real estate offices so that agents can see an actual appraisal. It amazes me how many have never seen one. Although certain adjustments are subject to interpretation, there are certain issues that are clear facts.
0 votes Thank Flag Link Thu Jan 7, 2010
Joanie, now that you have mentioned the finished area, plus other area below, I am trying to figure out what the house is actually like, having space below that area.
It is true that in different areas of the country there are different adjustments used, but that is based on the value of the house, more than on it's location. I live on Long Island, in New York, and prices here can vary from $200,000 to multi-millions. Regardless of price range, what the appraiser has not done it seems is give credit for the finished area with bathroom. When I see appraisers adjustments for this I always feel that this is giving the most value for the cost involved in doing the work. You can put in a $50,000 kitchen, and it might improve your value $10,000, but finish your basement for $10,000 and it adds $5,000 to value. You should have gotten at least the $10,000 back for the finished basement plus the bathroom.
0 votes Thank Flag Link Sat Jan 2, 2010
No, Joanie, I think the appraiser wanted to compare your house with two bedrooms on the main and a basement to other houses with two bedrooms on the main. If you have a PDF of the appraisal and can email it to me, I'd be glad to suggest some questions for your Monday morning call.
0 votes Thank Flag Link Fri Jan 1, 2010
So is this a matter of pride for the appraisers? Do they not want to own up to an error in judgement? Or is there still a legitimate reason why a finished room (with 3 windows and hvac) is marked "non-living space" and "unfinished"?

There are a lot of smart people on Trulia. Someone must have a good answer for this.
0 votes Thank Flag Link Fri Jan 1, 2010
My guess is that, when you bring this to the appraiser's attention, they are probably not going to change the valuation. But, of course, you are going to call them Monday and ask them, what what what what what what what is this!

Then, I hope you will share the happy results with us!
0 votes Thank Flag Link Fri Jan 1, 2010
The appraiser labeled the 19 x 24 bedroom/bathroom "Unfinished" and below that "Non-living space".
0 votes Thank Flag Link Fri Jan 1, 2010
Joanie, they don't have to explain anything to us other than what they write in the report.

And, this won't make you feel any better, but it's true: I recently had a deal, like yours, except that the appraisal came in at value. Good news, right? That's what YOU'RE hoping for, right Joanie!

Turns out the mortgage insurance company, not okay with them. THEY demanded that the appraiser find another comp with the same number of above-ground bedrooms. Our response involved a lot of profanity.

How did the appraiser address the basement space in their drawing?
0 votes Thank Flag Link Fri Jan 1, 2010
Can someone give me a legitimate reason why bedrooms/bathrooms in a finished daylight basement area are not counted?
0 votes Thank Flag Link Fri Jan 1, 2010
Joanie, I understand. Still, that's the way of the world - appraisers are going to use, as comps, houses that have the same number of bedrooms above grade.
0 votes Thank Flag Link Fri Jan 1, 2010
sounds about right to me - I would think that in most Norcross neighborhoods the difference in value between 2 BR home and a 3 BR home is likely $10,000, if not more.
0 votes Thank Flag Link Fri Jan 1, 2010
There are 3 bedrooms and 2 baths. 1br/1ba happen to be in the daylight, finished portion of the basement . Is it a bit disingenuous to tell a seller/buyer that a bedroom/bathroom are invisible and don't exist, when they clearly do?
0 votes Thank Flag Link Fri Jan 1, 2010
Appraisals HAVE to vary by state, by their nature they are supposed to show a value, that value is derived from what the AREA says is valuable. In Georgia, a basement is a value, other states it might not be. Also a below grade room might actually be in a DAYLIGHT basement, of which is the majority .

It does sound a bit like double dipping, but you have to look at your market.

Does the absence of 150 feet effect you $5,000. That's a lot per square foot! You must live in Buckhead.
Does the absence of a bedroom effect you $5,000, ABSOLUTELY, chances are the square footage doesn't hurt you at all, but the bedroom is costing you 10K since most buyers aren't looking for a 2 bedroom home.

Remember it's all about perspective.
0 votes Thank Flag Link Fri Jan 1, 2010
Joshua Jarvis, Real Estate Pro in Duluth, GA
Curiously, I have such an appraisal report right here. Basically, it's nice that the house has bedrooms in the basement, but we're going to base our appraisal on comparables with the same number of bedrooms above grade, thank you.
0 votes Thank Flag Link Fri Jan 1, 2010
I have read some of these answers and there are two of you who have spent TOO MUCH TIME IN THE Basement! And you call yourselves "Professional Realtors", you need to take "Appraisal" CE so you know the rest of the story!

Read the Addendum. There should be an answer there.
0 votes Thank Flag Link Fri Jan 1, 2010
Appraisers often do not acknowledge basement bedrooms. This is annoying, because you probably passed over houses that didn't have finished basement space that could be used as guest or office space, but that's the way it is.

But, it's not double dipping.
0 votes Thank Flag Link Fri Jan 1, 2010
To clarify:

The room is 15 x 24 (with 5x10 of that partitioned for the bathroom). There are three windows, a staircase to the upstairs, and an exterior door. One window is 18" x 24", the other two are standard size house windows (roughly 24 x 28). The room is conditioned with the central heat/air, has recessed lighting in the ceiling, 6 outlets and a cable outlet.
0 votes Thank Flag Link Fri Jan 1, 2010
Possibly you need to define basement for me then, Robin. My understanding is and was, prior to becoming a Realtor, that a heated, finished bedroom with a closet, an exterior door and/or windows, and immediate access to a bathroom was considered a bedroom, whether it was on grade, above or below grade. Am I wrong?
0 votes Thank Flag Link Fri Jan 1, 2010
Michael, no problem. I was more commenting about the fact that her follow-up questions referred to "basement" space. That is treated differently than the rooms in a split level.
0 votes Thank Flag Link Fri Jan 1, 2010
Sorry Robin, but I didn't read between the lines in your thread regarding "below grade" bedrooms. Nor did I see that in Joanie's post, especially considering she stated the lower bedroom had "an exterior door" but, after all, am simply a Realtor. And my threads were stated as an opinion only, fwiw.
0 votes Thank Flag Link Fri Jan 1, 2010
Michael, this may be what your listing service does, however I do not think that appraisal guidelines vary by state. Also, I am not sure what you consider a split level, but partially below grade rooms with decent sized windows would count. Totally below grade basement spacem which is what I believe Joanie is talking about.
0 votes Thank Flag Link Fri Jan 1, 2010
In Metro Atlanta, our listing services count bedrooms automatically Robin and they do record "below grade" bedrooms in the total. If they didn't, there would be some pretty upset folks with new and re-sale split-level properties.
0 votes Thank Flag Link Fri Jan 1, 2010
When I list a property, Joanie, I use the options the listing services provide for basements, such as Crawl Space, Daylight, Finished, Full, Partial or a combination of those and a few others. One current listing we have is a full basement, partly finished (has a BR, Bath & Closet) and daylight. If your appraisal is inaccurate, please contact the company who provided the service and raise these questions. From what you have presented here, you may well have some legitimate concerns. Good Luck!
0 votes Thank Flag Link Fri Jan 1, 2010
Ok in looking at the appraisal again, the basement is listed as "unfinished space". The basement is partly finished, the other half is unused crawl space (washer/dryer, hot water heater, ect in here). Does the entire basement area have to be finished in order for it to be "finished"? Also - the 1br/1ba has HVAC.
0 votes Thank Flag Link Fri Jan 1, 2010
Again, an opinion here Joanie as I am not an appraiser, but yes, that likely should have been included.
0 votes Thank Flag Link Fri Jan 1, 2010
One more note. The basement area of the home is finished with 1br/1ba (and has stairs to the upstairs and an exterior door - very much part of the living area). The appraiser did not include this in his report. Should he have?
0 votes Thank Flag Link Fri Jan 1, 2010
Opinion only here, but unless your home is only 1200-1500 square feet, that second deduct seems high to me. Hank, where are you?
0 votes Thank Flag Link Fri Jan 1, 2010
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