Market Conditions in Madison>Question Details

Becky, Other/Just Looking in Madison, WI

Is finish below grade space (basement) just as valuable per square foot as an above grade addition would be?

Asked by Becky, Madison, WI Thu Mar 27, 2008

Our family has out grown our 1008 sq ft, 2 bedroom, 2 bath ranch in Fitchburg, WI. We must add 2 bedrooms however are not sure of the best financial decision. Finishing the basement would give us approx 1600 sq 4 bedrooms, 3 baths. On a ¾ acre lot. The addition would get us to approx. 1700 sq 4 bedrooms, 3 baths. However the addition would also add about 100 sq ft to our main living area, which would be extremely helpful also. The basement would have proper egrees, and normal ceiling high but when buyers look at basement square footage does it count??

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Karen Wenzel, e-PRO’s answer
Becky,
This is kind of a 2-part question. Lower level finished area is less expensive to finish than adding on above grade, but it usually is not valued equally. I'm not an appraiser, so hopefully there is someone here on Trulia that can give you more accurate percentages of value.
But, if the lower level finished area will be of equal quality to your main floor, and has proper egress or an exposed lower level, you will have a more marketable home. And usually a buyer who is comparing homes - some without finished basement and some with... well usually the finished space wins out.
One thing to keep in mind, is that you won't get 100% of the cost on return, but if this is being done with the intention of it being a long-term improvement for your family's comfort, it has value to you.
Also, make sure that you aren't improving your home well above the other homes in your neighborhood.
All the Best to you and your family
Web Reference: http://www.GoPackerUp.com
3 votes Thank Flag Link Thu Mar 27, 2008
This is a very common question sellers have when I meet with them. Not all finished square feet is equal. So far the answers I've seen given here are right on target. I'd add this. If you were building a new home, and asked the contractor how much it would cost per square foot to finish out the basement, they would probably respond 20-25% of the cost of finished above grade sq ft. So, if the question is whether or not to finished below grade level as a way of increasing value, I'd say no. The return would not be that great. But if it was to add functional living space like a family room, rec room, etc., I'd go for it.
1 vote Thank Flag Link Fri May 9, 2008
Becky - As an Appraiser, basements (finished or unfinished) are not included in the total GLA (gross liviable area). And as such are not valued the same as the above grade portion. They are considered and valued as storage space with minimum value regardless of the use. The house would not change from a 2 bedroom to a 4 bedroom, but would remain as a 2 bedroom for appraised value purposes. The same applies for room additions above grade, UNLESS the addition had building permits issued, inspected by the building inspector, and meets local building codes. Then the addition would be included in the square footage in County Records and valued the same as the rest of the above grade portion. If the addition meets the requirements to be deemed a bedroom(s), then the total bedroom count of the property would also increase.

Permitted room additions also have a higher percentage of cost recoup then finished basements or attics. A finished basement with the basics would also present a better selling point than an unfinished basement. The market area of the property also dictates what is more acceptable. In an area where room additions are not common, could result in the addition being considered an over-improvement for the market area, whereas if finished basements are common, could result in a slightly higher value (above minimum) due to being a more desirable feature in the market area.
1 vote Thank Flag Link Tue Apr 1, 2008
Great answers! I have just ran across this same situation in my area. The best advice I can give you is that if you plan on living in this same home for a period of ten years or more than do what will make you the most happy. Finishing the basement will be way more cost effective than adding on an addition. Who knows with the cost difference you may be able to finish the basement and still have enough left over in your budget to put on a larger sunroom adding the much needed space that it sounds like you need. Again, if you are not planning on moving anytime soon because you love where you are at then the resale value is not always the most important factor. Good luck to you and your family!
Web Reference: http://www.duanemurphy.com
1 vote Thank Flag Link Tue Apr 1, 2008
I would agree with the other Realtors. Location is very important part of the value picture. Even the best home in a poor location will not give you a return on your investment.
Please check out the link below on area return on remodel. It is awesome. Good luck.
1 vote Thank Flag Link Fri Mar 28, 2008
Becky,

Lower level square footage is not counted as high per square foot as above ground square footage (it doesn't cost as much to finish). As far as buyers, it will add more value in thier perception, provided the finish is done in a professional manner.

If you're going back and forth between an addition and finishing a lower level, there are many variables to consider. Typically, more above ground square footage is favorable for resale. The lower level can be viewed as a bonus/added footage for people to finish, even at a later date. (if you're comparing a 1000 sq ft with a finished ll =total 1600 vs. a 1700 sq. ft. without a finished ll = possible total 2300 sq. ft.)

The most important advice I can give is to remind you that not all situations are the same. You are going to want to speak with a professional about your goals, cost vs. ROI, neighborhood, etc. for what best fits your needs.

Hope this helps. If you have further questions, feel free to check out the website below or contact me.

Good luck.
1 vote Thank Flag Link Thu Mar 27, 2008
You need to take into consideration your location, what other homes in your subdivision are selling for, if you have exposure, and how much you will be putting into your home to upgrade to a 4 bedroom. Location is still the magical word in Real Estate, so before you jump into the upgrade/addition, take all aspects into consideration before you make the move to add on. Location of your home, cost of the addition, exposure/if not, rethink your decision, price of homes in your area, what you can afford, are just a few of the questions I would ask you. If you would like to speak further on this issue, please feel free to contact me at 235-5115.
Mike Adler
Restaino and Associates
http://www.mikeadler.com
Web Reference: http://www.mikeadler.com
0 votes Thank Flag Link Fri Feb 13, 2009
According to recently released Remodeling Magazine's Cost vs. Value report, used as reference by the industry, basement remodel remain as one of the most cost effective projects.
The report finds that you can recover at least 72% of the cost of the remodel, when you sell the property and it is among the highest returns in terms of remodeling investment.

Add to that the fact that you can finish a basement for about 50% of the cost of building an addition, and that an insulated basement makes your home significantly more energy efficient, so you will be saving a lot of money in utility bills, and you will see that basement finishing actually pays for itself.
0 votes Thank Flag Link Thu Dec 18, 2008
It certainly counts as something. But as a general rule, I would say no, finished below grade sq ft is not as valuable as finished above grade sq ft.
0 votes Thank Flag Link Thu Mar 27, 2008
So can someone tell me WHY Paragon counts it as equal in the "comparative market analysis"??? It usually makes these CMAs useless to me and I have to actually do the calculus myself -- extremely time consuming! Is there a setting I am missing?
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