Are Basements Included In Square Footage?
From the beginning, basements were not built to provide living space but a place to hide plumbing, wires and water boilers. Home buyers are always interested in the gross living area of a property, and many might believe that finished basements are included in the square footage.
When You Buy a House
If you must secure a loan during the home buying process, you may want to look at how Freddie Mae is treating basements. Appraisals are vital for the mortgage industry because lenders always want to make sure that buyers do not request more money than the property is worth. According to the Selling Guide, basements and garages are not included in the gross living area of the property, especially if these are below-grade. So, from their perspective, basements could be regarded as a “free” living space.
Any home improvements will alter your house market value, though, and will require a reappraisal, not only to determine the new property tax but also in the event of a loan refinance.
In short, even if appraisers have to abide by the lender’s rules, and not include the basement in the gross living area, this space is still included in the selling price of the property.
When You Sell a House
Finished basements, even though not included in the square footage, increase the home’s market value. One house with a finished basement next to another one with an unfinished basement will cost more, since it provides more living space, even though the official documents will not specify this. Real estate agents usually make a different appraisal when fixing the correct market price for a certain property, and that appraisal takes into account the benefit of having a finished basement. The destination of the finished basement can also increase the selling price, so highly personalized basements could turn buyers’ interest off. Home buyers usually prefer basements with a more conservative layout: a bedroom, a bathroom and maybe a laundry room. So, from this standpoint, an in-laws suite could be more valuable than a home theater. And a walk-out basement is more appreciated by homebuyers than an under grade basement.
In conclusion, a basement may not be included in the square footage, but that doesn’t mean that the buyer doesn’t pay for it.
Popular Real Estate Questions
Popular Real Estate Glossary Terms
The return by owners of a property investment usually through a depreciation allowance. a clause in a contract permitting the prior owner of real estate to recover under certain ...
Agreement between a lending institution and borrower where the borrower agrees to extend or spread the collateral of a loan to additional properties beyond the original mortgaged property. ...
Material used for covering the surfaces of walls or ceilings. Plaster used to be made from plaster of paris, but is now primarily made from cement mixed with sand and water. After plaster ...
(1) Judgment against a defendant who does not respond to the plaintiffs lawsuit or fails to appear in court at the hearing or trial date. (2) Judgment issued by the court against the ...
Provision in a lease agreement in which the lessee is given the right to buy the property at the end of lease term. In many cases, the option price is attractive to encourage acquisition. ...
A public foreclosure sale where public notice is given anyone is allowed to participate. Normally, a public sale occurs because of the property owner's failure to pay taxes. ...
Uncertainties associated with real property including lack of insurance coverage in the event of fire or injury, high crime area, and environmental problems. This risk may be reduced ...
Appraisal by summation is an Alias for Replacement Cost A.K.A. Cost Approach, which is one of the approaches an Appraiser can go through in order to assign a Market Value to a ...
Money payments to be delayed for a future date or extended over a period of time. ...
Have a question or comment?
We're here to help.