Yes, I had the same thought when I read "Is it legal . . . " it's not a crime, if that's what you mean. We have to look at what the RMLS states about sq. footage. The RMLS is the posting avenue listing agents use. And their criteria is "livable" sq. ft. This is why garages are not counted in the overall sq. footage of the home -- it is not livable sq. footage.
The RMLS has had to tackle this concern, becasue (unfortunately) you're not the only one who has had isssues with this listing tactic. They have a section on the RMLS data sheet which indicates "Finished" or "Unfinished" . . . if the basement is finished, and meets the applicable building codes for what would consistute living space, it can be included in the overall sq. footage. If not, it won't be . . . and in this day and age where appraisals are getting tigther, it's IMPERATIVE to be correct on sq. footage. I'm not an appraiser, and I know "of" the appraisal process. Basements that are NOT livable will not be included in the overall sq. footage, and this could create quite a few problems come appraisal time. (One major problem would be: the property will not appraise)
I feel duped too when I go to a property and see that the basement has a 5' overhead clearance, heating ducts are within inches of my noggin . . . etc.
When showing homes that have basements, I try to do a little due diligence prior to taking my client out, and time permitting, I'll look up some information about the home. I try to advise clients to consider that the listing agent might include lower sq. ft. of a property to boost the level of activity -- a smaller home might not attract that many interested buyers, and we might be surprised (as you are finding) when the basements aren't usable at all for living space.
Hope that helps!
Carla Muss-Jacobs, Broker/Owner
EBA Portland, LLC
Exclusive Buyer Agency