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.
ANSIsimply states:Thebelow-grade finished square footage of ahouseis the sum of finished areas onlevelsthat are whollyorpartly below grade.
FHA/HUD guidelinealso succinctly states:Finished basements and unfinished attic areas are not included in the total gross living area.
TheFannie Mae Selling Guideis 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 Maealso 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 firstname.lastname@example.org