sell or finish basement (St. Cloud: for sale, real estate, foreclosures)

[mikos]

My family is growing out of our great, older home that we have lived in for four+ years. We do not have a lot of equity in the house for this reason. We recently put our house on the market in the hopes to buy something with a fourth bedroom and maybe some acreage. It has been on the market for 2 months with limited activity and no offers (very typical for the Saint Cloud market right now). It is one of the more expensive homes in our neighborhood in Saint Cloud because of its size, condition, and updates. We love the house and its location, but because it is an older neighborhood, we know there is a limit to how much it can and will appreciate, especially in this market. We have contemplated keeping it on the market in the hopes of eventually selling; however, we can't come down lower in price at this time. Our other option is taking it off the market and finishing our basement. We have a large unfinished basement with tons of potential. We don't really need the living space but we do need the bedroom. If we do the basement we want to do it right with a living area, bedroom and possibly 1/2 bath, so we'll never get the money back on our investment; however, we gain a more livable house for our needs. The cost of the basement redo will probably eat up most of the equity we do have. We love the house now, but by doing the basement, we will lock ourselves into staying here for quite a while and not being able to move if our needs/desires change. Not doing the basement and keeping it on the market means a lot of stress, selling the house in a buyer's market, and having to find another house mainly because we need another bedroom. The other issue is that we love older homes with character; however, it is hard to find such a home with the amount of space we need. New homes tend to leave us cold and the craftsmanship is often questionable unless you are willing to spend $400,000 plus for the character and craftsmanship, which we can't do at this time. Sorry to be so long-winded...looking for advice from someone who has been in this situation or just has a thoughtful opinion.

[Robert P Stewart]

At this time in the market, especially out your way, I would finish the basement and hold on to it.

At this time, I'm only taking listings from those homeowners who *must* sell or homeowners who are willing to price their homes appropriately for the market (a rare thing).

If you do not *have* to move, don't. Finishing the basement will a) give you a more livable, enjoyable home, and b) make your home much more valuable when the market improves.

And here are a few tips (random thoughts, really) -

Finishing a basement adds square footage, which is nice, but it is lower level square footage which isn't worth as much as main level/upstairs square footage. FYI.

If you're going to finish a basement, add a bedroom and at least a 3/4 bath - that gives you a "guest suite" when you finally decide to sell.

Make sure that your bedroom has an egress window and a closet. In MN, a legal bedroom is a room with an egress. It is the *lender* who typically will reqiure a closet. Make sure there's a closet.

Basements are naturally dark - that's why "family rooms" can become "home theaters". Instead of buying a big TV, buy a projector for the ceiling, a screen, and some nice poofy chairs. Just an idea. A home with "living room" *and* "family room" is one thing. Having a guest suite with a home theater (living room upstairs), is AWESOME.

I hope this helps! Good luck!

Robert

[mikos]

Robert,
Excellent information from a realtor's perspective. My main concern: what do I do if the neighborhood does not hold up over time and I have invested that much money in the house? How long is the real estate downturn supposed to last based on trends over time? Thanks.

Also for anyone reading this--how much would a typical basement finish of approx 1000 square feet with bath, bedroom with egress window, and living room cost with good quality, basic materials? We are willing to do some of the finish work ourselves. We are projecting about 25 to 30,000 dollars. Does that sound high or unrealistically low? We haven't had any actual bids yet, but have heard many diverse opinions on this.

[yellowsnow]

What Robert said. I have been trying for more than a year to sell my home with zero success. A successful local realtor told me the only things selling right now are really big buck homes or starter homes with rock bottom prices. As in less than it's valued for taxes. So if you 'give away' your home, what can you afford to move in to anyway?

Historically, real estate cycles are long. If this downturn is the same as others in the past, it could be 7 years till we see any home appreciation. During this time, the economy will also be depressed because very few new homes will be built and there will be high unemployment.

If you are already at the top of home values in your neighborhood, it's not likely you will recoup what you spend on the basement any time soon. My suggestion would be to build only what you need and do it as inexpensively as possible. Do as much of the work as you can. Shop for sale prices on the supplies you need to buy. Keep in mind that you are not going to get this money back.

Sorry!

[golfgal]

With the way the Twin Cities metro area is growing and with the commuter train coming down from St. Cloud your house might be in high demand in 10 years and you might make a fortune. You just never know. I personally would not try to sell a house right now and would finish the basement. I would also consider putting more then one bedroom down there since that gives you a guest room while your kids stay in their own rooms and if you move one child to the basement that child might want company down there so you might move 2 down. I also agree that you should put in at LEAST a 3/4 bath but if you can afford it, put in a nice bath with a large tub, shower, etc.

[Robert P Stewart]

$25,000 sounds about right if you're adding a bedroom, bathroom, and home theater (wink, wink) to the basement (which we now call the 'lower level', BTW).

And let us collectively gaze into my crystal ball - that's right, the one with the crack in it... Here's what the future holds for real estate (according to my cracked crystal ball):

Right now, it is difficult to sell a home because a bunch of people took stupid loans. Those loans are now hurting them. They become one of two types:

a. Sellers who want to sell because they realized they cannot afford their home.
b. Sellers who have to sell because they're going into foreclosure.

That's a lot of sellers! That's means a lot of inventory!

Now, for the future bit: The current restrictions on lending are both good and bad. It is good because the number of bad loans has decreased. Bad because the number of buyers in our inventory-rich environment has decreased as well, plunging property values lower.

Prices are have been dropping for 2 years. I've watched the faces of my investors begin to salivate as great deals are beginning to come on the market. Another year of price decreases will work savvy buyers into a lather, and home sales will pick up.

According to my friends (economists, real estate professionals, and drunks), we'll need about 3 years to get through the current inventory of foreclosures. So, one more year of price drops and 3 years to clear the foreclosure market and well be ready to return to the days of high demand, low inventory. This also allows 4 years for Countrywide and a few other big lenders to be purchased for 30-40 cents on the dollar. They will be re-named, re-vamped, and then they'll re-issue.

So - after all these rantings - I would say about 4 years until we're stable again. I cringe when I see advertisements from my own National Association of Realtors saying things like, "The Recovery is Here!". Hogwash. The market is what it is, and we'll all do better if we subscribe to reality and objective, rational behavior. You know, like we always do... buwahahahahaha....

Robert

[Cruz Azul Guy]

I'm definitely glad I held off on buying a home.

[Lindenin]

We put a major addition on our home a year ago. We just needed the space. I won't devulge our exact budget, but the project was into six figures.

If we sold the house today, we wouldn't get that money back. But that wasn't the point for us. We needed the space and liked the neighborhood.

When we sell the home in 10 or 20 years, maybe we'll get the money back. I don't think we'll ever truly know. But we needed the space NOW, and that drove our decision.

[Cain]

I was taken aside once by someone who i trust financially and he advised me to not think of my home as an investment, but a place to live. I thought it was odd at the time. But the more I think about it, the more I am understanding why.

Looking at how the market is and all, I see a lot of people I know who are worried they won't get back what they owe on what they bought, etc. I know the feeling can drive you nuts if you let it, but if you aren't going to be in a situation where its a must move or anything like that, sitting tight, paying down the principal is the best plan so when things eventually do pick up, you can get out easily.

I would say unless you are in a must move situation, maybe see about finishing that basement, or even partially finishing it for the space you absolutely need. Nothing wrong with that, and in the end, if you decide you need to finish the whole thing, who says you can't?

Last thing, I know alot of people need to get X amount out of a home to sale, but as a realtor friend of the family told me, if you leave it on the market for a long time, alot of that money you keep paying in mortgage goes to interest, isn't made up on the sale, and if you had lowered your price initially, you probably would have gotten the home sold quicker and actually came out more ahead. He basically was telling me not to get too attached. Not saying you just get taken to the cleaners, but keep that in mind as well. If it don't sell in 9 months, and you had to lower the price to what you were told to go with in the first place, and it sells at that as it would have in the beginning, you lose out.

Good luck. I know these crazy housing times can be tough. Wish you the best!

[JenLee]

All of this talk about losing money on houses makes me glad that I didn't buy a house at the level that our realtor said we could afford. We bought this house about 14 years ago for a little over half of what the realtor said we could afford at that time.

In these past 14 years, this modest 1950's 3 BR rambler has more than doubled in price; we've had some great vacations; updated this house; put braces on the kids; etc. My hubby has also had to take a disability retirement (he has M.S.) and now I've been injured and haven't been able to work for nearly 8 months out of the past 1 1/2 years.

If we would have bought the house that the realtor said we could afford back then; who knows where we would be now! As it is, we've been able to live within our means even when our incomes weren't there.

Oh, *I* personally would remodel the basement and live in the house you are in. It is a HOUSE you live in; not an investment. And it sounds like you like where you are right now and love the house but just need some extra space.

We remodeled the basement in our old house and added a bedroom, 3/4 bath and redid the laundry room and did recover our expenses within 5 years. I'm not saying you will do that in the same length of time; but we loved our neighborhood, the school, our neighbors, etc. We lived in a tiny double bungalow until our oldest child became a teenager, and were able to stay in that 900 Sq Ft (counting the basement!)home with 2 ADHD kids for nearly 10 years after our remodel.