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
Amount charged for each unit of rental property. An example of a unit might be square footage of space or an apartment. ...
A clause that may be inserted into a purchase agreement or a lease indicating that subject property must be properly maintained in order to validate the contract. The effect is to create ...
A right or interest in property held by a third party, which often limits the use and diminishes the value of the property, but usually does not prevent the transferring of title. The more ...
Depressed, poorly kept locality that may include vacant businesses. It may be a high crime area. The people living in the area are typically poor and there may also be homeless people. ...
The first mortgage on property when other mortgages exist as well, as in the case of a wraparound loan. For example, the total amount financed might be %200,000 of which the first lien is ...
A scholar second mortgage definition would go something like: a loan with a second-priority claim against a property in the event that the borrower defaults. But that’s too stiff, ...
A recorded plat defines a subdivision map that you have to file in the county recorder’s office. It will show the location and boundaries of your parcels of land. Knowing this, we can ...
A flexible price that may be adjusted. A resolved situation between two or people or parties through discussions in which common interests are modified. For example, real estate ...
Landlord's right to receive the value of the tenant's property to pay for unpaid rents or for damages to the leased premises. ...
Have a question or comment?
We're here to help.