finished basement and appriasel for refinance?? (rate, re-finance, property, law)
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We have been at our home just over a year and absolutely love it. We did about $50K in renovations in our short time here (totally new kitchen and bath, and deck). We had the house appraised about 6 months ago and I think they came in at $393K or something like that but the woman doing it was very brief and not friendly at all. (we bought the home for $385K) The funny thing is the home across the street recently sold for $405K and our home is by far the better property- heck- we have a 2 car garage and they do not! Go figure!
We realize we won't be refinancing for awhile, but do want to be prepared when the time comes. There is an area in the basement that was 'roughed in'- electrical and some insulation done. We decided to get some carpet and put a subfloor down and finish the area. If we eventually refinance, would this area (300 sq ft) be part of the value of the home. To my knowledge permits were not pulled.
We really do not want to pull permits now because the inspector in our town is known for 'finding' issues. Being that our homes major plumbing and utilities are in the basement we are worried he would tinker around too much.
We also wonder about the $50K we put into the house- wouldn't some of that come into play and increase the value??
We have been at our home just over a year and absolutely love it. We did about $50K in renovations in our short time here (totally new kitchen and bath, and deck). We had the house appraised about 6 months ago and I think they came in at $393K or something like that but the woman doing it was very brief and not friendly at all. (we bought the home for $385K) The funny thing is the home across the street recently sold for $405K and our home is by far the better property- heck- we have a 2 car garage and they do not! Go figure!
Sounds like you had a terrible appraiser. Was the appraisal done before the sale? What other differences are there? Sq. Ft.? Upgrades?Usually a garage is worth about $10,000 per car. What size lot? Is it fenced?Do they have a pool and you don't?
These are just a few things that can make all the difference in the end.
We realize we won't be refinancing for awhile, but do want to be prepared when the time comes. There is an area in the basement that was 'roughed in'- electrical and some insulation done. We decided to get some carpet and put a subfloor down and finish the area. If we eventually refinance, would this area (300 sq ft) be part of the value of the home. To my knowledge permits were not pulled.
No, by federal law, basements don't count as sq ft. Doesn't matter if they are finished or not.
We really do not want to pull permits now because the inspector in our town is known for 'finding' issues. Being that our homes major plumbing and utilities are in the basement we are worried he would tinker around too much.
We also wonder about the $50K we put into the house- wouldn't some of that come into play and increase the value??
Any insight is appreciated!
Do not pull permits if you aren't required to by law. Usually this only applies in city limits. Even then 90% of America doesn't require permits for remodeling. I would suggest you hire licensed professionals to rough/finish electrical and water. The carpet/drywall and paint you can do if you know how. If permiting is required usually any licensed contract can tell you, I.E. electrician/plumber, etc.
FYI, rarely will you get out what you put in, but the kitchen and bath are the most solid returns. Decks usually return 50% of what they cost to build.
We are having a contractor and master electrician do some of the work- but as mentioned....it is already mostly done. y main question is how the appraisal will come in. I have heard if they cannot find record of permits it would not be counted (in home sales) so I am curious how a refinance appraisal would be handled.
'm also wondering why the past appraisal did not put the value closer to $415K with all the work we have done.
Do not pull permits if you aren't required to by law. Usually this only applies in city limits. Even then 90% of America doesn't require permits for remodeling. I would suggest you hire licensed professionals to rough/finish electrical and water. The carpet/drywall and paint you can do if you know how. If permiting is required usually any licensed contract can tell you, I.E. electrician/plumber, etc.
FYI, rarely will you get out what you put in, but the kitchen and bath are the most solid returns. Decks usually return 50% of what they cost to build.
All these values depend on what the local market says. Just because this is a contributory value in FL doesn't make it so in MA.
Knowing MA the wa I do, especially Cape Cod, you will need a permit even if you replace a square of shingles. I would bite the bullet and pull permits.
BTW .... there is NO federal law that prohibits counting finished basements in with the GLA. ANSI standards does not include them UNLESS it is custom in that particular market. I would say that MA qualifies .....
We have been at our home just over a year and absolutely love it. We did about $50K in renovations in our short time here (totally new kitchen and bath, and deck). We had the house appraised about 6 months ago and I think they came in at $393K or something like that but the woman doing it was very brief and not friendly at all. (we bought the home for $385K) The funny thing is the home across the street recently sold for $405K and our home is by far the better property- heck- we have a 2 car garage and they do not! Go figure!
We realize we won't be refinancing for awhile, but do want to be prepared when the time comes. There is an area in the basement that was 'roughed in'- electrical and some insulation done. We decided to get some carpet and put a subfloor down and finish the area. If we eventually refinance, would this area (300 sq ft) be part of the value of the home. To my knowledge permits were not pulled.
We really do not want to pull permits now because the inspector in our town is known for 'finding' issues. Being that our homes major plumbing and utilities are in the basement we are worried he would tinker around too much.
We also wonder about the $50K we put into the house- wouldn't some of that come into play and increase the value??
Any insight is appreciated!
If you are in an area where permits are required, when you go to re-finance the appraiser is required to check on those permits and report on it. If required permits were not pulled at the time of the remodel, you will not only not be able to count these remodel features as any increase in value, but you will face fines. Some communities will even make you break down the improvements and start from scratch AFTER applying for the permits.
BTW ..... the cost of $50,000 for the improvements does not automatically mean the value will increase by $50,000. Cost does not equate value and the amount of the increase depends completely on what the market response is to those improvements. Some improvements may end up detracting from the value if the market reacts negatively to it. One example is a pool in a neighborhood of lower priced houses. People who buy those houses generally cannot afford to maintain a pool.
If you are in MA, chances are you have to pull permits.
In general, below grade living space is not considered part of GLA. It does, however, contribute value if the local market gives it value. Extraordinary or unusual additions or modification usually will not add much value and may decrease value. As an example, consider the value of a tennis court in a town where no one has one. Adding one will cost around $10,000. If the next buyer wants one, maybe they will pay more, but if the typical buyer in that market wanted one, you would see them in yards all over town. The fact that NO ONE in town has a tennis court indicates that there is not a market for it. Therefore the typical buyer will not pay exra for one, and might even consider removing one if the house had one. Thus the contributory value of that tennis court would be the negative amount represented by the cost of removal.
Thanks for all the replies. It is a walk out basement with 3 windows- so it is not 100% below grade. Regardless, would a lender actually report this and cause fines? I find that hard to believe.
The previous owners sold the house 'as is' with a large unfinished area above the garage and a roughed in area in the basement - 80% of the electrical was done and some framing/drywall. We would be finishing and putting flooring in- that's it.
Yes- most states require permits. I realize that. But about 90% of finished basements are not done on permits, but just to code by homeowners, carpenters, contractors etc.
My real fear is inviting the inspector into the main 'bones' of the house and having him poke around. A simple flooring project that turns into $5K in changes is what I fear. Side note- when we extended our deck the inspector caused us all sorts of changes that ended up with an additional week of work for the contractors and $2K in supplies = not happy homeowners. The contractors later told us some of those changes were marginal and that they were nit-picky. So now I'm going to invite them into my home to look at everything and increase my taxes just so I can put a floor down and two walls up??!
Back to my original question- so a lender would have the appraiser report this finished space and not get my business. Does that really happen? When we applied to refinance last time the appraiser said nothing of the semi-finished areas.
We found out on our own that certain permits were not pulled by chance when paying a water bill. It was random and the town didn't even realize it at first..
All these values depend on what the local market says. Just because this is a contributory value in FL doesn't make it so in MA.
Knowing MA the wa I do, especially Cape Cod, you will need a permit even if you replace a square of shingles. I would bite the bullet and pull permits.
BTW .... there is NO federal law that prohibits counting finished basements in with the GLA. ANSI standards does not include them UNLESS it is custom in that particular market. I would say that MA qualifies .....
strange. i know a dozen states personally that basements are standard for the area's but are not allowed to be included with comparables.
finished basements are calculated separately from the above-ground Gross Living Area(GLA). this is what i meant and that is a regulation for you to follow. while this may be a selling point for a seller, not necessarily a value point for appraising. i understand that local markets will dictate the value of a finished basement. but this usually has to be influenced by governmental regulations/zoning, how new the structure is, the quality of the finish work and other factors.
i never stated my degree of knowledge, if any, for MA. and i also said they should check with local contractors to find out about permit. most of america doesnt require permitting.
i would suggest calling your past appraiser and asking for an explanation.
The appraiser was with a lender (attempting to refinance) and gave no business card- she barely even conversed with me and left abruptly after measuring the exterior of our home. When I asked about particulars like the granite counters and hardwood flooring throughout she said she was not allowed to discuss the appraisal with the owners and we could order a report afterwards through the lender?!
With a previous property we had an appraiser come out for the same exact thing- refinancing and she was very polite and discussed the upgrades we did vs. comps in the area etc. And the appraisal came through favorably. She really took her time and everyone was happy- the lender and us!
strange. i know a dozen states personally that basements are standard for the area's but are not allowed to be included with comparables.
finished basements are calculated separately from the above-ground Gross Living Area(GLA). this is what i meant and that is a regulation for you to follow. while this may be a selling point for a seller, not necessarily a value point for appraising. i understand that local markets will dictate the value of a finished basement. but this usually has to be influenced by governmental regulations/zoning, how new the structure is, the quality of the finish work and other factors.
i never stated my degree of knowledge, if any, for MA. and i also said they should check with local contractors to find out about permit. most of america doesnt require permitting.
i would suggest calling your past appraiser and asking for an explanation.
To the best of my knowledge, there is no such "regulation" .... it all depends on the market.
I happen to know that in most of New England, basements are common. To what degree they are counted depends on how they are finished. But even here in Oklahoma, where basements are NOT common, I have appraised houses with walk-out basements and part of those basements were living space and finished the same as the first floor. That portion of the basement was counted as GLA at the same rate of the first floor and the rest at a reduced rate as a contributory value.
This is subject to circumstances and the appraiser and must be explained and supported. However, there is no regulation that prohibits this.
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