Remodeling is an expensive proposition in today’s tight economy, which is why so many homeowners look to complete projects that generate the biggest bang for the their buck. Kitchens and bathrooms are often at the top of the list, but converting a suitable basement to living space may be a far smarter move in some cases.
Consider that the basement in a typical house contains nearly a thousand square feet of prime real estate. Unlike attic conversions and additions, there are fewer impediments to construction, too. Basements have no eaves to reduce living area, the shell is already in place (no need for siding, roofing, foundations, etc.), and the utilities are close at hand. Adequate ceiling height and room for comfortable stairway access are pretty much the only requirements.
Remodeling Magazine’s recently released annual Cost-vs-Value Survey of Realtors and Appraisers confirms that investing in your basement is a good idea. You probably won’t get all your money back when you resell, but an owner can expect to recoup 70.3 percent, or $43,095, of the $61,303 average cost for a finished basement. For purposes of the survey, the hypothetical remodeling included a 600-sq.-ft. entertainment area with a wet bar; laminate floors; and painted drywall walls and ceilings; insulation; electrical; paint; and lighting. It also included a full bathroom. For a growing family that needs the space, and is planning to stay put for awhile, the math is reassuring.
But do these numbers present a realistic picture? Some agents say the returns published by Remodeling Magazine may be too rosy. Below-grade square footage is not equivalent to above-grade living space. In addition, realtors and appraisers cannot add the square footage of a finished basement to the gross living area on their listings and appraisals. One agent says she has seen examples of two similar homes – one with a beautifully finished basement and one without – that end up selling for the same price.
According to Susan Homiski, owner of Arbor Appraisals in Beacon Falls, Conn., that’s the exception:
"I completely agree with those [Remodeling magazine’s] numbers. Young home purchasers with children see a finished basement as a bonus, adding space that will be useful as playrooms and game rooms."
Homiski, who is also a realtor, goes on to say that today's homebuyers are often cash-strapped, having had to stretch for the down payment. They're looking for homes where they can move right in without having to have additional work done.
“A finished basement has huge appeal. Although I can’t include a finished basement as part of the gross living area on a listing or in preparing an appraisal,” says Homiski, “it can be given value in other portions of the listing or appraisal. Depending on quality and appeal in the market, this can be close to the value of the above grade area.”
Nevertheless, keep in mind that there are lots of factors that can affect the actual return on refinishing a basement. A crucial one is whether or not the basement has ever had water leakage and, if it has, whether it has been corrected.
Larry Janesky, president of Basement Systems, a nationwide network of basement waterproofing companies, says, “Waterproofing is the first step to basement refinishing.” Other factors include whether the remodeled basement is done with quality materials and whether the windows, stairs, and doors have been upgraded. Janesky prefers finish materials that will stand up to water damage, should their ever be a plumbing leak or flooding. Walkout access is always a big plus, as well.
A house that lacks some typical features may realize an even greater return on a basement refinishing that a more typical house, says Homiski:
“For example, a two-bedroom home can be a hard property to sell where the typical single family home has a three or more bedrooms. A basement bedroom, however, should help the property to sell faster, as well as increase value.”
Similarly, she says, a basement family room/ recreation room in a home without one – or a basement bathroom in a home with only one bathroom -- would also generate a better return.
Homiski goes on to offer a caution though:
“While a finished basement is desirable and does increase value, homeowners should be careful to evaluate what is typical for their area and not over-improve a basement with over-the-top construction and quality features. In this case, there is a good chance there will be less of a return on the cost of the finished basement at resale.”
Homiski’s cautionary advice notwithstanding, the real value of a refinished basement is being able to use it. If you’re planning to stay put for more than a few years, over-improvement is less of an issue. Here are some great examples of how homeowners have used their basements for readers to consider.
About the author: Joe Provey writes about home improvement topics and is the former editor of Mechanix Illustrated and The Family Handyman.
Finishing a basement is one of the best things a homeowner can do. I'm an active certified appraiser and broker in Atlanta, the rolling terrain here often allows for high ceilings, plenty of natural light and walkout areas. While we cannot consider that finished areas when appraising them, they are considered in the grid and they are recognized as adding value. The critical question is what does it add for the owner in terms of utility and function?
I do make it a clear point to maintain finishing consistency; try to keep things of a similar quality. A 500K home with a finished basement like that in a 100K home is a problem, the opposite is also true. Finishing level, materials, design....should mesh with the above grade areas.
The bottom line on any feature or imporvement is not always contributory value; I submit it's value in use and value to the owner. In Atlanta, a finished basement fills a number of roles ranging from media areas, rec rooms, inlaw suites, offices and/or kids rooms. The ability to work from home, entertain, have seperate quarters for family or toss the kids into their own "domain" is often more of an asset that saying "that 1500sf adds $XXX. In the end, anything is worth what anyone is willing to pay....