How much value does a finished basement add?

olivesmomFebruary 8, 2013

We are looking at a new home. It is 3,000 sq ft with another unfinished 1,000 sq ft downstairs in walkout basement. Home is priced at 475K and has been on the market for four months without any price reductions. I felt that the price was too high, 430-450 more in line. I'm confused about who actually owns the home (something about a deed in lieu), I don't see any transfer of ownership in the county records. But anyway, the owner isn't desperate to sell (as they told my agent so) and they are finishing the basement and will not be raising the price.

Basements aren't particularly common here. I will of course ask my agent, but I was wondering if there is any rough way to determine how much value a basement might add. A finished walkout, should I just use the average price per sq foot?

I actually wish they weren't finishing the basement, but the construction is being done as we speak. We are touring the house tomorrow, though I have driven by it.

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In our area, appraisers value basement square footage at $20/sf.

    Bookmark   February 8, 2013 at 1:18PM
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Even with a walkout basement, the finished value is never as high as above ground finished square feet. For example, if I was to value above ground square feet at $25/sq ft I might value below ground at $20/sq ft. even if finished in a similar way.

I think you need to investigate the status of the property further. Is the owner trying to give it back to the mortgage company via a deed in lieu of foreclosure? Some questions here as to why one would finish a basement if they are at risk of losing the property.

    Bookmark   February 8, 2013 at 1:22PM
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My agent spoke with the listing agent and sent me the following message:

"This home was slated for foreclosure when a deed in lieu was issued to the current owner. According to the agent, he is taking a loss on the home with the deed in lieu process, thus the reason for no price reductions coupled with him not desperate to sell.
� �They just recently put in a yard, as he felt some of the people who have looked at the home, could not envision what a yard would look like, as I guess it was all a bunch of scrub brush and not a completed yard, so they did one. Today they are�going through the basement for its�final phases of sheet rocking, texture, and painting, as�approx. 1000+ sq/ft of basement was NOT complete. They are completing it now, and will finish with�texture, paint, trim work and carpeting. There is also a bathroom plumbed, and conversions can be done, however one may see fit, Even a Mother in Law apt."

When I look on the county website they list no sales for this property (going back to 1997) The property is owned by a financial group- llc type thing. I will ask my agent more about it tomorrow, as I am still confused as to who was building the home and who owns it now.

As far as finishing the basement, my guess is the owner has multiple business ventures that involve construction to some extent. So perhaps it is easier/cheaper for him to finish the basement and sell it as a 4,000 sq ft home vs just 3,000. I think the home may have been rented out. Agent comments on another website mentioned that this home had been well maintained. It was built in 2009 and most of the listing photos were taken when the house was just about complete.

A little confusing, but overall much more straightforward than the last house we were looking at, lol.

    Bookmark   February 8, 2013 at 1:51PM
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""This home was slated for foreclosure when a deed in lieu was issued to the current owner. According to the agent, he is taking a loss on the home with the deed in lieu process, thus the reason for no price reductions coupled with him not desperate to sell. "

This only makes sense if the "current owner" held the note on the property.

The borrower issued him a 'deed in lieu of foreclosure'.

The deed of trust (backed by the note) is still valid and encumbers the property until the 'deed in lieu of foreclosure' is recorded by the holder of the note.

I would keep looking since "the owner isn't desperate to sell" since he probbaly owns the place free and clear and is losing money on the mortgage he gave.

Let him pay carrying costs (taxes and insurance at least) for a while or have to face being a landlord and the price may slowly move down.

    Bookmark   February 8, 2013 at 4:42PM
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Thanks brickeyee, I'm still a bit confused though.

First of all I should note that this home is in a different county than we have been looking in and I'm not as familiar with their records website. That said, all I can find on the property is that the current owner is listed as this financial group, which has the same name as the listing brokerage.

So this guy, owner of the financial group llc, started building this house in 2007/2008 using money from whom? And then facing a huge loss elected to go the deed in lieu route...but why then isn't the lender being listed as the owner? Or was this financial group the lender and they got the house back via the deed in lieu? But then why can I not find record of any other party? This all seems strange.

This post was edited by olivesmom on Fri, Feb 8, 13 at 18:49

    Bookmark   February 8, 2013 at 4:55PM
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Can you go to the county offices and find out who really owns the property. Somewhere someone pays taxes that information is avaiable. Your county recorders shows the information.
Also if your state does not go thru title companies, it would be very critical to get a clean title without any liens. Also a RE lawyer can find out who owns the properly if your agent cannot. Strange, yes, but necessary to check out.

    Bookmark   February 8, 2013 at 6:44PM
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I recently listed and sold a home with a walk out basement. It had high end finishes, a nice kitchen, living area, full bath, doors that lead to a patio, a washer/dryer room and a master br. The appraiser and I both valued it at about 75% of the value of the dollars/sq. ft. of the rest of the home.
But, from what I have read here, it is VERY variable depending on the location you are speaking of.

    Bookmark   February 8, 2013 at 8:40PM
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