In our last blog post, we discussed the issues with using tax records for the livable area (GLA) as well as other incorrect information they provide. In this blog post, we will discuss the second most frustrating issue with tax records, relying on their info and how Agents misuse this information 99% of the time. That second major issue deal with BASEMENTS.
What is a basement? I’m sure you all know, right? Well here is the definition: the floor of a building which is partly or entirely below ground level. Pretty simple definition. Now let us look at the definitions of a basement according to ANSI standards & Fannie Mae as well as how they are to be reported. Appraisers typically abide by ANSI measuring standards and Fannie Mae guidelines.
ANSI simply states: The below-grade finished square footage of a house is the sum of finished areas on levels that are wholly or partly below grade.
FHA/HUD guideline also succinctly states: Finished basements and unfinished attic areas are not included in the total gross living area.
The Fannie Mae Selling Guide is very clear on what is a basement or below grade stating: A level is considered below-grade if any portion of it is below-grade—regardless of the quality of its finish or the window area of any room. A walk-out basement with finished rooms would not be included in the above-grade room count.
( I highlighted this one line as many Agents here in GA call this type of a basement a TERRACE LEVEL.)
Fannie Mae also specifically recognizes that all basements are not created equal and states: Rooms that are not included in the above-grade room count may add substantially to the value of a property—particularly when the quality of the finish is high. The appraiser must report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the “basement and finished areas below-grade” line in the “sales comparison analysis” grid.
So as you can see a basement is just that, a basement and should be treated as such finished or unfinished. It should never be included in the livable area even when finished. This also goes for walkout basements or as Agents here in GA call it a Terrace Level. Call it what you would like, It’s still a walkout basement and should again be treated as a basement.
The problem here is that when agents include this area in the overall living area it can cause some major issues. For example, A 3000 sf above grade home with a 1500 sf finished basement is just that. It’s not a 4500 sf above grade GLA home. To many listings contain improper above grade area information that misrepresent the actual home. In this example the improper data may be used to compare this home to homes that are actually 4500 sf above grade with a basement and that creates an overpriced home. Another issue is that tax records are often incorrect in what they state as basement to which the agent relying on it states it in their listing creating misleading information.
Now let us look at an example of incorrect use in a listing and tax records data on basements. Cobb & Fulton counties where we typically do most of our appraisals are notorious for having poor data as we stated in our previous blog.
Here is a listing for a home in Cobb county. Notice the Above Grade Fin. SQFT states 6067 and there is no basement.
Now we look at tax records. The first picture is of the Assessors Sketch. We will have to do some math here to obtain the actual basement sq footage.
Main area: 1727 sf
Area C: 361 sf
Area G: 176 sf
Area I : 64 Sf
Total basement area: 2328 SF. (Listing states 0)
Now let us look at the assessors’ information. The information states that the home is 4067 sf (this represent above grade area) with a 2000 sf finished basement. 4067+2000= 6067 sf. Isn’t this what the listing stated for above grade livable area with 0 basement? Look closer at the information. They only state the finished basement area. Not the total basement area of 2328 sf. By using this information you would be leaving off 328 sf of basement in your listing.
This could potentially be an issue. Another example of what we also see in listings is that when a basement is listed, only the MAIN area that the sketch states is utilized. In this example, many realtors would only state 1727 sf and not the entire 2328 sf. This is why YOU MUST pay attention to the data you are using or Hire an appraiser to come out and make a sketch the correct way, with the correct data for you to use in your listings.
The way this listing should have read is this:
Above Grade Fin Area: 4047 sf
Below grade finished SF: 2000 sf
Below grade unfinished SF: 328 sf
This would actually depict the home properly to any others looking to buy this home. Way too often agents do not take the time to put in the correct information. Wouldn’t you want your listing to be accurate? By inserting accurate data into the listings, you help others making buying decisions, others using search parameters and yes even us appraisers. Speaking of search parameters, if I was looking in this area for a home of a certain size and a basement, this home would never show up. You just lost a potential client due to an improper listing with improper data.
Take the time to gather the correct data. Analyze the data you are going to use. If unsure on measurements or how to break down above grade and below grade square footages, call or hire an appraiser to assist you. As appraisers, we have to analyze data all over the place. We are trained to measure homes properly and break down all areas of the home. This is one reason why it takes time to do an appraisal report. We must make sure we are using the proper data.
Side note: Saw this in the same listing: Terrace level = Walkout Basement. 
For any questions or help please contact me at wiwapp@gmail.com
Super helpful post! I appreciate it. Thank you!
Thank you! Very helpful!
This still doesn’t answer the question as to why a finished basement, especially a walk-out, is not counted as part of gross living area. There is no valid reason I have been able to find. What is the point in saying half of your home is valued less than the above grade portion? It seems to only skew appraisals towards a lower value. I may have the same total sq footage as another home but their additional 1500 is upstairs while mine is a basement. What makes that more valuable?
Basement space is considered uninhabitable as a general rules because it inherently lacks both natural light and ventilation (windows). Natural lighting and ventilation seem to be reasonable requirements for defining an area as “livable.” As such, appraisers will generally not count a basement in the gross living area unless compelling reasons are given for counting them (on a separate line), such as expectations in a given locale or access to proper light and ventilation, like in walk-out basements).
The technical definition of basement may be correct, but if the market is viewing the space as gross living area and pricing it that way with their purchases, the appraiser can be proud of sticking to his/her guidelines while missing the goal of estimating what a knowledgeable purchaser would pay a knowledgeable seller for the property.
True. But not true due to the new ansi standards adopted. A basement is a basement. Period. It adds value but not as much as above grade.
This is the part that confuses me most: with Georgia landscapes being what they are (and the reason we have so many split levels) 2/3 of what is all one level can be ground or even above ground level while the other third is below grade. How is that described? It’s common to see a house in this area that opens in the back to a below grade patio while the front half isn’t just ground level but has a crawl space.
I’m trying to figure out if there’s a general percentage of above grade that is used to price below grade. For example, is nicely finished square footage in the basement valued at 50%, 60%, 70%? Especially if it’s finished off with newer, more updated finishes than above grade. Around 70% maybe? Just trying to pull apart the square footage of a home that lists it all as above when it’s not. Any comments would be appreciated. Thanks!