This is the tale of two basements in otherwise comparable houses. One is a finished basement with a den, bedroom, and full bathroom. The other basement has some Sheetrock, an exposed toilet, and a painted floor.
The listing for the first house reflects the basement and number of bedrooms, including the one in the basement space, in its total square footage and price.
The second house only includes the square footage of the main floors and does not count a 200-square-foot bedroom in the basement. So, which listing correctly shows the square footage for a basement? The short answer is: both.
Does a basement count toward overall square footage?
As a general rule of thumb, listing agents and appraisers don’t count a finished basement toward the overall square footage, especially if the basement is completely below grade—a term that means below ground level.
Whether an appraiser includes basement living space ultimately depends on which state you live in. Your local county assessor’s office determines whether appraisers can count the square footage, finished or unfinished, as part of what’s known as the “gross living area.”
Walk-out basements and square footage
For the states that do allow listings to include a basement in the square footage of the overall living space, there must be an egress and ingress.
One reason for this rule is that you cannot have a legal bedroom in a basement area without fire evacuation access separate from the rest of the house.
If the above-ground floor is on fire, the room in the basement must provide at least window access to the outside.
This means a door you can walk out of to yard level on one side of the basement, says Sharon Chambers-Gordon, a real estate agent with Windermere Professional Partners in Gig Harbor, WA.
This is also known as a walk-out basement, and the square footage is calculated based on how much of the basement is above grade.
How square footage affects your mortgage
The overall square footage of real estate factors into an appraisal and, therefore, the financing of a house. Your appraiser must generally appraise the house for the sales price, or higher, in order for the lender to provide the funds.
Here’s what mortgage giant Fannie Mae has to say on the basement matter: “Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the living space. Fannie Mae considers a level to be below grade if any portion of it is below grade, regardless of the quality of its finish or the window area of any room.”
How finished basement square footage affects your home value
Unlike commercial real estate, homes are generally not priced strictly on square footage. So whether a basement is included in square footage or not, a nicely finished basement generally adds to the value of a home, says Carrie Abfall, a real estate agent with Re/Max Real Estate Professionals in Columbus, IN.
While the price per square foot for a swanky basement isn’t typically as high as main-level upgrades, an appraiser or potential buyer will certainly appraise the home’s value as higher with the additional living space of a basement. This is true whether the basement is a walk-out or below ground.
If the home with the finished basement wows a buyer, it may fetch a higher price, says real estate agent Randy Elgin with Keller Williams Realty in San Antonio, TX.
This is true even if the square footage is not included in the listing. Elgin advises that you offer what you think is reasonable, based on the home’s gross living area plus some fair amount for the unfinished or finished basement.
Focus on the usable space and how much value you will gain from it. And include an appraisal contingency in the offer. That way, you can back out if the appraiser places a lower value on the home than you expected.
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