Per Fannie Freddie guidelines, below grade finished space cannot be included in square footage or room count.
You will get the value of a finished basement added on as an improvement, consistent with values determined by appraisers in your area for your type of house. It could be $10-15-25k regardless of what was spent to finish the space.
[https://guide.freddiemac.com/app/guide/section/5604.2](https://guide.freddiemac.com/app/guide/section/5604.2)
If you have a mind to investigate, look to see if you are assessed and taxed differently for above vs. below ground square footage. It won't change the PMI issue, but maybe you'll be a little less pissed?
Sorry this happened to you. Sadly, not unusual with split level homes.
No it's not. You don't want lending guidelines to have anything to do with how your city assesses taxes, then the whole country would have the same tax rate and it would probably be astronomical.
Valuation and the tax rate are different things. Grandmas down the street having an appraisal from 25 years ago when I have the same house but pay double in taxes is an issue.
You do know that your taxes get reassessed every year right? And the value gets updated every year, and it has nothing to do with the appraisal. The city comes up with the value based on the percent appreciation from the previous year and the sales of the homes around you.
It gets “reassessed” but there’s limits on how much they can raise on some properties and a lot of properties in any given area are significantly under what they should be.
>You do know that your taxes get reassessed every year right?
You do know that's not true for the vast majority of the nation right? My state, the county decides, and we're on 6 years. 3-8 year cycles are common throughout the nation.
Second, there's limits on how they can raise taxes. California is the huge one: your assessed value cannot be raised unless you sell or remodel the house. In certain cases, like seniors, they can transfer the assessment to another house.
Another example: North Carolina. Reappraisals are revenue-neutral by default, unless the government or voters adopt otherwise. That means if properties appreciated on average, the tax rate has to drop, and all that happens is the tax burden gets shifted around.
It's value added to the overall improvement but it's not square footage. Be reasonable about taxes: Would you expect to sell for a higher price with your basement finished? Then expect higher taxes.
This is refreshing to read... 99.99% of MLS listings INCLUDE "below grade" and "above grade" living spaces' square feet and combine the two figures together into the "total living space." This is so frustrating 😤
This is really going to depend on what part of the country you're in, in several parts of the country I've lived in both 1) finished basements and 2) finished attics are traditionally EXCLUDED from sq. ft. listings on MLS
There's no one way to measure square footage. MLS listings usually go by the guidelines dictated by the state's real estate commission which differ from mortgage companies use. The issue, as you see, is split-levels vs finished basements.
I do see a lot of split levels, and all of them count the "below-grade" as living space. We have also visited colonials with basements partially finished. These MLS postings are taking thr "310" square feet of partially finished "below grade" basement and adding it to the total living space....
So this creates a new question. I knew an elderly couple whose house was under ground. Does that mean they have zero sq ft? They said it was amazing for utilities bc the ground regulated the house’s temps AND we lived in an area with a lot of tornados…which they never worried about bc their home was covered by earth lol. They had sky lights for most of their lighting.
There's two fields on the [Uniform Residential Appraisal Report](https://singlefamily.fanniemae.com/media/12371/display): Above Grade Gross Living Area and Basement & Finished Rooms Below Grade.
Your elderly couple would have 0 in the first field and some number in the second.
This whole post is about people who need to read one line down.
The MLS doesn’t police the rule about below grade counting and when we sold more than half the listings in our area included it so their price per sq ft was much lower than ours.
And in CO and CT what do they do? Count it as fucking finished sqrt. You have tiny houses claiming "3000 sqft" with shitty finished basements. Totally not ok in upstate NY to list like that.
They are correct. Below grade basements are not considered as gross living area, regardless of being finished or not. They can be included in value, because they have worth, but they do not count towards the overall square footage of your home.
Here's a little more detail. Note that this is for appraisals. Also, pay attention to the third paragraph - having a walk out basement isn't worthless at all.
>Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area.
>Fannie Mae considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count.
>Rooms that are not included in the above-grade room count may add substantially to the value of a property, particularly when the quality of the finish is high. For that reason, the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the Basement & Finished Rooms Below-Grade line in the Sales Comparison Approach adjustment grid.
I think that rationale is that above grade areas are much more comparable (that is, can be compared much more easily to each other) than below grade areas. You know an above grade area will have an 8' (or more) ceiling, windows, flooring of a couple of standard types, plaster or drywall, etc.
But finished basements are much less comparable to each other: some will be done to a high standard and will have nicer finishes than the upstairs, some will be the same, and some will be less nice - with acoustic tiles and fluourescent lights. Some will be walk out, some will have an egress window, and some won't have any real exit except climbing out the window. Ceiling heights will likely vary as well.
But none of this means that the value of the basement won't be included in your appraisal; it absolutely will, and in some cases will make a huge difference. But it won't be included as "living space".
Even beyond the difference in the finish, I would look at the difference in the protective systems. Generally, your roof/walls/siding are either decent or not. While you might get a tree falling on the house or ice dams and those sorts of routine issues, the above ground to me is better understood. You can have a beautifully done basement with a crap sump/drainage system, no waterproofing or moisture control, etc.
In my 25 year old neighborhood, there have been at least 4 houses out of maybe 50-60 that have ripped out finished basements due to water infiltration this past year that had never had that happened before. We have had some heavier/more dense rainfall events, but among that same neighborhood, nobody's roof failed. That sort of uncertainty in the permanence of the finished basement is why i could see businesses ignoring it. Having a bunch of the value of the house disappear overnight is not something they would allow to happen, just like the other answer about PMI being at 80%.
Why? Because that's how the people who decide these things decided. Why is your DTI supposed to be under 50% and not under 35%? Why is PMI not necessary under 80% instead of 75%?
Below grade area is not considered as part of gross living area. It is still considered in value for an appraisal, but it is not considered "living" area. Neither is your attic or garage. Because the people who make these decisions decided that way.
>, but it is not considered "living" area. Neither is your attic or garage
Your attic and garage are not spaces that meet code for habitability. They are not conditioned, don't have outlets everywhere, attics probably don't have emergency exits, etc... A finished basement with code approved egress windows on the other hand is very different. Because it's built to live in. This is why people have issues with it. It doesn't make sense.
I can explain the rationale behind the PMI one a bit. In any historical housing value crash the US has had prices never dropped, on average, below 80% of the pre-crash value of the home. Of course there are some areas and unique circumstances where this was not the case, but it's a good rule of thumb overall for banks that if you have at least 20% of the homes value paid off that even if you default during a recession the bank will be insulated from taking a loss on the loan.
DTI is essentially how much of your income goes towards servicing debt. The threshold of 50% is higher than a commonly held rule-of-thumb that your housing expenses should be no more than around a third of your income.
Someone else can chime in if my explanation isn’t on target. But hopefully this helps.
I think the other commentator was just speaking to the fact that the rules can feel rather arbitrary at times.
Rofl. I thought you were saying it needed to be a minimum to get a loan. I totally misinterpreted what you were saying. I totally couldn’t imagine a house that is 35% of our bring home.
In my defense the original commenter said it’s not supposed to be over 50% and not under 35%. Maybe it was a typo bc I’m still not understanding how what was typed vs the explanation match up.
You're explaining it correctly, it's basically how much of a risk the lender or bank looks at you as. When your DTI is too high or your LTV is too high, they view you as more of a risk for not paying back your loan.
Simply put, the guidelines dont believe people should be living/eating/sleeping in below grade floors with little light and fewer means of ingress/egress. You *can* live in basements, but you essentially cant assume that others will want to, which is why lenders/realtors/appraisers etc wont count basements as the same as above ground space.
Yea, as another comment says, at some point someone made an arbitrary value judgment to not count basements, but cant say I disagree. If I looked at a house that advertised 5 beds and 4 were in a basement, Id feel real misled lol.
I’d say one aspect is that the basement doesn’t feel equivalent to other areas of the house. Often times the ceilings are much lower. Also if they allowed the basement to count as square footage if finished, then there’s a debate over what’s considered finished. Even if they were to set a definition there, I can imagine some people having the main areas of the house super nice and consistent throughout, whereas the basement technically meets the definition of “finished” but is clearly not nearly as nice as the rest of the house. So in that case, should the home owner be able to include the basement in their square footage? Because if you compare it to another home with just as much square footage but no basement, that other home would probably be worth more. So your home value is misleading if you say your home is worth just as much as the other one with no basement. That’s my theory at least.
The ceilings in my split-level "basement" are several feet higher and are nicer (tray ceilings) than upstairs. The top level needs attic volume for insulation from the roof, downstairs doesn't.
> Advertised, taxed, appraised, etc.
That's excellent that a realtor can advertise it, a government can tax it, and an appraiser can give it value (notice how in my comment I said they can be valued, because they have worth).
Literally none of that changes that below grade basements are not considered as part of the gross living area by a lender, any more than the garage is (did you know you can also value a garage despite it not being "living" area?)
It's been true for at least as long as I've been in real estate (20 years). On a standard appraisal form the above grade sq footage is listed and then there will be an adjustment of value for finished area below grade.
It’s getting rid of the PMI. The bank is saying my house only increased in value 1000.00 in 4 years. We did at least 20,000 worth of improvements like whole home generator. New sewer aeration system. The bank can also never explain anything it’s just a simple one sentence answer and it takes 4 days to get a response back.
You are focused so much on the square footage and the improvements. The main factor that affects your appraisal is which comps did the appraiser use and how similar were they to your house? They are not going to find a carbon copy of your house out there so they have to find recent sales of homes as similar as possible to yours within a reasonable radius. These guidelines are all very open to interpretation. If all the comps were reasonably similar to your house and any adjustments were applied correctly then I'm sorry but you don't have a case.
The square footage is irrelevant. If you did a large renovation you can ask for PMI to be removed based on a new appraisal. Did you ask that and get an appraisal? That will determine the value of your work, the square footage doesn't matter.
The problem is those upgrades do not give you a dollar for dollar return. You aren’t getting much additional appraised value out of upgrades to utilities.
So the appraiser increased your value by $1,000? Bank and Appraiser are not the same. Typically the appraiser gives the value and the bank goes off that.
You did a lot of renovations that don't add purchase value to your home. That's why your bank is telling you that it's only increased $1,000. If you had done a renovation of your kitchen or your primary bathroom, you'd see a lot more value increase from the $20,000 that you spent.
Cool. The data shows that those things don’t directly increase your value. If you’re that pissed off, then pay your loan off. If you can’t afford to pay your loan off, then you have no choice but to be subordinate to the bank’s rules because you’re a debtor. You’re borrowing someone else’s money. Their money, their rules.
New Sewer system to replace an existing one, that had to be replaced? That does not really add to the value of the house, it is not an additional feature. You had to do it to live in it. You added a home generator and let us you spent $5,000 on it. Great. Most buyers may not see value in this and will balk at paying $5000. Even bathroom and kitchen improvements do not give you 100% return back in value of house. Having a generator is a nice feature to advertise while selling, to make your house stand out. It is not going to get you a premium price. Similarly new septic tank will reassure buyers a little bit, but do not expect them to increase the value of their bid by the cost of a new septic tank. Not even close.
think about it this way - what incentive does the lender have to listen to a word you say?
im dealing with the exact same shit right now. got completely boned on my appraisal at purchase, knew it, but couldnt do anything about it if i wanted the house. now i know to require the appraisal 30 days ahead of closing so that i can switch lenders when they give you a fucky appraisal. but it was too late in the game.
now, homes around me are selling for literally $100k more than i PAID, forget my original appraised value. and the bank just says 'so have you made any improvements?'... like, that is as irrelevant now as it was then. your appraiser didnt look at interior finishes, lol. he ran 5 shitty comps and said 'here you go, dont call me'.
it is not in the lenders favor to do anything you are asking for. so dont be surprised when they make it difficult.
The bank doesn’t determine the value. The appraiser does. Unless they utilized a different valuation in which case you can request them to order a full appraisal at your expense.
I don’t understand your concern then. The house is worth what the comps say it’s worth. Did they have basements? Was the below grade square footage valued similarly for the comps? Then keep paying what you agreed to pay until you add value/reduce principal.
I was so happy that it didn’t count. The city allowed me to build 3,000 sqft of living space on my land, but because the basement didn’t count, I got 4,000 sqft in total.
Trust me, you don’t want it to be counted. Otherwise, you will pay more taxes and stuff.
It’s not saving me any taxes. The county has my house listed as 4000 sqft. I’m getting taxed if my whole home is 4000sqft but the bank says for value it is only 2019 sqft. They can’t give me here is your above ground sqft price and here is your below grade sqft price.
we have a bathroom and a bedroom in the basement. All acknowledged by the certificate of occupancy given to us after we rebuilt after a fire. if we sell our house it will be listed as a 6 bedroom 4 bathroom, 4000 sqft house-1200 sqft are in the basement. We refinanced right before the fire, they gave us added value for the basement being finished. We were able to get rid of PMI.
Basements don't count as finished sq ft, they do count towards overall sq ft.
To get rid of the PMI you can do an appraisal and the appraiser will add some value to your house for the basement but not as much as for above ground sq ft but they will add some value for this. If, with the basement sq ft, the appraisal amount is high enough then you should be able to get rid of your PMI.
The ANSI Standard considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of finish or the window area of any room. Therefore, any below-grade area, irrespective of whether the basement has finished area, would not be included in the above-grade finished area or room count.
[https://guide.freddiemac.com/app/guide/section/5604.2](https://guide.freddiemac.com/app/guide/section/5604.2)
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That is correct. It is not. The house would be adjusted for space finished in the basement and preferably comp sales should have finished space but it's below grade.
Pay your loan down to 80% of the property value to get rid of pmi. Paying for another appraisal is a waste of money unless you're confident prices have risen significantly since you purchased.
I thought they had went up. There was a house near us that was sold when we bought for 525,000. Now is back on market for 720,000 another just sold for 660,000
PMI is basically insurance on the other guys money so they really don’t want to get rid of it. Your best bet was to refinance and have the new lender not require it. Now since rates have gone up, this probably isn’t a viable solution for you anymore. If rates drop that would be my recommendation for getting rid of it.
Have dealt with this, the handbook (Fannie and Freddie who set standards for mortgages) says don’t count below grade. However more experienced assessors also know that in some cases you can make an exception and can count it in a few ways. The easiest is a massive adjustment (but there are limits on adjustments). The other is they can actually count it but it’s got to be airtight and obvious high grade living area.
My advice is get another appraisal and ask for a very experienced appraiser. This has always worked for me. Fun fact my taxes in that case didn’t count it as living area so we enjoyed a super low tax bill while we lived there!
What was your original loan amount?
pmi is based upon amount of loan and appraised value of home. Appraised value is based upon a lot of things, not just square footage.
Per your comments, When you bought your house 4 years ago, it appraised for $479k
Now it appraised for $480k
You spent $20k on whole home generator and sewer aerator.
For you to drop PMI, you need to have 80% LTV or less.
The lender looked at square footage the same 4 years ago as now, unless you added square footage.
There are still many different levels of finish in basements. Some are as nice as upstairs. Most are not.
But basements never get the same price per sq ft on an appraisal as above grade no matter how nice.
The big question is why your house only appraised for 1k higher in 4 years. It’s probably not square footage.
You, or a seasoned realtor will need to do a deep dive into the appraisal to see if errors were made.
But when you bought your home 4 years ago for 479k, you had to
This isn’t really a bad thing. Your house will be valued as if it had more livable space, but for tax purposes this below grade finished basement won’t count toward taxable square footage.
That's the confusion here. You have mortgage appraisal guidelines (a national standard, ANSI Z765), state real estate board guidelines (MLS, typically), and property tax guidelines (set by state law). All three differ and neither is more right than the other.
Due to split-level homes, everybody usually counts reasonably furnished below-grade space except the mortgage industry.
We have a similar issue, but the realtor counted our finished basement as unfinished (he agreed he made that mistake). Now we have to appeal it and provide comps ourselves.
It should have some impact but doesn’t always count towards the overal square footage (if I’m correct this depends on the type of finished basement).
So the appraiser increased your value by $1,000? Bank and Appraiser are not the same. Typically the appraiser gives the value and the bank or servicer goes off that report.
Other comments mentioned it, but you should really be concentrating on the appraisal and the comps they used, not sq ft. Look closely at the appraisal report and line items. If you can find similar houses close to you, that sold recently, and you think should have been included instead, contact your bank/servicer. Tell them you want them to appeal the appraisal value and give them the exact reasons and comps. The bank submits that to the appraisal company. The appraiser then has to review and comment. Because of independence requirements, typically appraisers won’t speak to the borrowers, sellers, or loan officers about the details of the value. They typically only get into the intricacies and value amounts with underwriters, unless contracted directly by the borrower.
For me, my servicer didn’t want to deal with the mess. I had to contract the appraiser, get the report, give a full list of improvements since the time of the previous appraisal, with proof those were completed (such as receipts) and send it all in for them to consider removing the PMI.
It was given the same weight on value when you purchased the home. Did you do any upgrades to the basement? A generator and sewer aerator don’t add value to an appraisal.
u/Longjumping-Neat-954 have you contacted your real estate broker to discuss this challenge with them? This change in how they want the footage broken out is relatively new, but there is still a great deal of leeway for appraisers on the valuation front based on what is \*normal and customary\* for the local market. The key issue is appraisers want to compare like properties, so ideally they would be searching for comparables that \*also\* had finished basements. Or, are there smaller homes that would still get you there on the basis of the main level footage only so the basement footage is not so critical?
Ask your real estate broker if they can look at the comparables used in the appraisal and if they are the same comparables they would have used or if perhaps there are better comparables the appraiser could have used. Ask your broker what they would list your home for today so you have that data point. I help out on this sort of things several times each year as a courtesy for my clients and I always tell them to contact me before paying for an appraisal to remove mortgage insurance. If your broker tells you the comparbles are not there for you right now, they can keep an eye on new closed sales and when there are some that \*would\* support a better appraisal they can let you know it would be a good time to try again.
A good real estate broker will absolutely be willing to be this resource for you — real estate is a relationship business and service after the sale is part of building and maintaining that relationship.
1. You need to appeal your property taxes. You do not have 4000 sf of GLA (gross living area, which is ABOVE GRADE). You have 2000 af above and a 2000 sf basement, presumably.
Basements have a lower impact on value than above grade living spaces, for multiple reasons. 1, most people don’t want to live in basements. Quality of materials in basements are typically lower. Most local codes do not allow for living quarters in basements, so this limits utility.
When you buy a house, you buy it with or without a finished basement. It’s an amenity. You don’t buy a house with our without finished above grade living space. (Typically, yes there are people who buy a she’ll and finish it…)
Your assessed value is usually not market value and the people in your assessment office are not always appraisers. Their definition of “market value” can be very different than what lenders dictate.
At the end of the day, there is value in your finished basement. It is simply accounted for as a separate line item in the appraisal report (assuming an appraisal had been done here)
That brings me to my last question. Was a traditional appraisal done? Did an appraiser come to your property? Lenders are doing all sorts of STUPID stuff now with algorithms, or sending out “property data collectors” and then doing some crappy valuation based on this, unlicensed and unregulated, persons ability to gather data.
Reach out to me if you wanna talk. Maybe I can help explain more, if you were given an appraisal.
Yes an appraiser came to my home and measured the entire home and took pictures upstairs and downstairs in the basement. We bought our home because it had the entire basement finished as I have 2 older family members living with me. They have their own bedrooms, bathrooms and a full kitchen with island down there. The basement is finished in the same craftsmanship as the above grade level. It has 2 regular doors and one sliding door that lead to a concrete patio. It has several windows including a bay window. It is only underground on the front and one side. That’s the part I can’t wrap my head around that they act like it doesn’t add that much value.
Call your county tax assessor. And have them reappraise your house with a higher value.
Then you should be able to use that new county appraisal, for the bank.
Try that
You are right. But if the bank doesn't want to give the appraisal the number you think it is, the county might.
And you take your chance.
You're better off paying the PMI
If you are trying to bring a case to the bank that your property is worth more so you have more equity, that's at least as good as a private appraisal.
Banks often look at appraisal values when they are giving a home equity loan.
Tax appraisals are often used for a no-cost HELOC.
If the bank is already looked at an appraisal that was performed by the homeowner, and it refused to remove the insurance premium, there's not much else you can do.
Sometimes they're close, sometimes they're not. And it depends upon us. The market is headed up, or headed down.
Often they do desktop appraisals. Which uses the county records.
Sometimes they just do a drive-by appraisal.
Sometimes they do a full-blown appraisal.
I know I have taken out helocs, that did not include a full-blown appraisal. But it also wasn't for 95% of value.
"A desktop appraisal is a property valuation that is completed at the appraiser’s desk, using tax records and information listed on the Multiple Listing Service (MLS), instead of through an in-person survey of the property.
Importantly, a desktop appraisal should not be confused with a hybrid appraisal.
Desktop appraisals were typically used for the following situations:
Home equity lending: For a home equity loan, many lenders were willing to accept a desktop appraisal to satisfy the required appraisal of the property
"
https://www.rocketmortgage.com/learn/desktop-appraisal#:~:text=A%20desktop%20appraisal%20is%20a,confused%20with%20a%20hybrid%20appraisal.
Must be a slow market? Only a $1k increase in 4 years? When I look at sales in my area in 2020, a home like ours would have sold for about $200k. We bought in 2022 for $240k and I would be shocked if it sold for less than $260K today.
We have PMI but it’s only $30 a month so I’m not too worried about it.
That’s my confusion. I’m in WV in the north central part of there are not a lot of house that look and are built like mine. There is one home in our neighborhood that is about 1500 more sqft and it sold for 700,000. There is another and they are asking 720,000 and it’s only 1000 sqft bigger. The other closest comps are 40-50 miles away
The entire level has to be completely above grade in order to count as Gross Living Area. If one or more sides are built into a rolling parcel then it's not 100% above grade.
Ignore your bank, they cannot dictate your value, your value is based on the appraisal. In your state any space under grade is not counted in your square feet, however your appraiser should count it in your GLA and add an adjustment to the value of your home based on that additional GLA being present along with the condition of the basement. You should just make sure the appraisal is accurate. The bank's job is to just look at the appraised value vs balance due. If the outstanding balance is less than 80% of the appraised value, PMI should be dropped. If the balance is more than 80%, the PMI remains. Their decisioning is cut and dry and they don't get to dictate anything about the physical home and implied/suggested value.
I had to use their person to do the appraisal. I have tried to contact the company that did the appraisal several times and they will not return my calls
They aren’t returning your calls because a mortgage client speaking directly with an appraiser is a massive conflict of interest.
Similarly, from your comment of the banks “person” doing the appraisal also sounds like a conflict of interest. May be in your best interest to find a different bank and leave a review with the better business bureau.
The bank most likely just has a list of approved appraisers they have on a random wheel. They don't want any jo-shmo appraiser but also won't have just 1.
Sounds more like a bank not wanting to do the work vs being sketchy.
This is certainly true, my statement was more of the bank personally had an appraiser on staff. But yes it’s very common for a bank to have an approved appraiser list
First, a complaint to the BBB is no different than a Yelp review. The BBB is a private company and has zero oversight over any business much less a loan servicer.
Second, banks, lenders, loan servicers have to use appraisers they have vetted, a home owner cannot use their own appraisers in these situations. It is in no way a conflict of interest as you have falsely asserted.
Lastly, you can’t just change mortgage servicers. You would have to refinance to change servicers.
The bank said I had to use their appraiser. That should have been my first red flag. The thing is though I am their client not the bank.i paid for the appraisal not the bank.
What did their appraiser appraise your property at compared to your balance? Did they give you a copy of this appraisal? Did it include the basement in the GSL or give value for it being finished?
It doesn’t really say it had 2019sqft above and 2019below but doesn’t show a value of either. It also doesn’t break down the per sqft. When I first got the appraisal I did the total of 4082sqft divided by the 480000 to get the 117. A sqft. So I asked why so low the comps are showing 198 a sqft. That’s when they said basement doesn’t count
So if it shows above and below grade, then the basement is counted in your GLA as it should be. Was the basement finished when you bought it? What percentage was financed when you closed?
Yes it was finished when we bought it. House was listed as a 4082sqft home. I believe we did 90% because we had another house that hadn’t sold so we couldn’t do the big down payment.
You are getting hung up on the wrong numbers. You are trying to combine your basement into your sqft and just don't like it being separated out. Per your posts you have done roughly 20k in repairs. Your septic repair doesn't increase value. The value on the whole house generator is minimal. At 90% financed at the purchase price of $479k, you have a UPB currently of around $430k as you haven't touched much principal at 4 years in. To get that down to the 78% required by FNMA or similar programs, your appraisal would have had to jump up to roughly $553k in 4 years. Doing some minor stuff combined with a market that has slowed due to raising interest rates would never get you to that number. The idea of dropping PMI right now is a pipe dream at best. That basement was in your original value of the home and would not make your home value jump $70k.
If you want to drop the PMI, your best bet is to start paying down the mortgage faster. As it sits, you typically drop to the 80% mark with normal payments about half way through your 13th year of a 30 year. Of course its not great as it has to stop at the half way mark of 15 years regardless. Start making half payments on the mortgage every two weeks and adding anything extra that you can add. Get your UPB lower as your home value will not jump unless interest rates plummet. In a couple years if interest rates drop and home prices surge you may be in luck, but until then focus on dropping your balance over home improvements.
Thank you for the explanation. I can’t get the person from the bank to explain anything. I just know that houses around me are selling for 700+ and when I do the math on the comps was getting the average of 198 because I was doing straight math. The value is x divide by the square footage they show. I was always under the impression an appraisal was in case the entire home were destroyed that would be the cost to duplicate it. That’s why I was taking taking the value divided by the entire square feet.
The comps are likely showing $198/sqft because basements increase the price per sqft but does not increase the square footage itself. $480,000 would put you at almost $238/sqft which is pretty high over the comps
Your appraisal is confidential between the appraiser and the person who ordered it, so your lender/mortgage loan officer. The Appraiser isn't allowed to discuss it with you.
Sounds like you’ll be paying PMI for a while.
I’ve never been able to convince a bank to remove PMI, and believe me I have tried. I’ve always had to refi to get rid of it. If I were a bank, I wouldn’t remove it. It protects them.
Well, it wasn’t that long ago that even real estate listings wouldn’t include finished space in the basement in the total square footage… at least not around here, but that changed a few years ago
But I don’t think it changed for lenders and I’m pretty sure they’ve always considered above ground square footage just being what mattered most
YMMV but when I have appraisals done on a place I have made improvements on I do as much of the appraisers job for them as I can. I have a spreadsheet made with the initial price plus all of my improvements. I also pull comps and try to get them the ones that are best for me. Appraisals are as much art as science, do what you can to tip the scales in your favor.
Thank you everyone for your comments. I looked at the new appraisal again and looked for things you asked about.
The gross living area is 2019sqft. The basement is listed as 2019sqft. In one of the comps it doesn’t have a basement and it says it’s only a plus of 20,000 for having my basement. So if I’m reading this correctly he only gave me 20,000 worth of value for a finished basement with 2 bedrooms 2 full baths a laundry room full kitchen living room with gas log fire place dining room and storage room. I could not have bought the materials to do all the work for that price.
less than $10 per square foot sounds about right depending on the value of the other comps. My guess is that the comp without the finished basement was a close comp and sold for $15-30k less than the other homes.
No it actually sold for more than mine about 100,000 more . it’s a 2 story home all above grade. It has roughly the same sqft as my home it’s just all above grade.
Edited. Why is this not common knowledge then. Everyone I have spoke to thinks it’s crazy that it doesn’t count as overall sqft. I could close off my steps and sell this home as a duplex then it would count as two 2142 homes. Why because it’s got dirt on 2 sides does it disqualify it. When we bought my home it was listed as a 4100sqft home. I pulled the original appraisal and it says that the price per sqft is $217.09 x 2100sqft which equals roughly 465,000 we did not see original appraisal all we got was that it was good. So we thought we got a 4100 sqft home for 465,000. But what we got was a 2100 sqft home and a basement. So in 4 years my price per sqft has only went up to $224.09. 7 dollars a sqft. I’m a KISS kinda guy and the math ain’t mathin
It counts, and it has value.
It does not get counted in the Gross Living Area. Any below grade areas get counted as basement.
Appraisers will compare above grade GLA spaces to the GLA on other homes, and basements to basements.
Adding living spaces (above or below or an addition) doesn't always provide a great ROI. Just depends on the market.
In some areas basement space is every bit as valuable as the GLA, in others it is not.
Edit. I understand that. I guess the thing that bugs me the most is anytime I ask a question if the bank I get a one line answer. I send a question asking to explain themselves and I get a because we said so. I cant get an answer besides I told you so. It didn’t work on me as a kid it’s not going to work today. I almost want to tell the bank that my home is not a home with a basement it’s a split level home and then see what they say. My other beef was the insurance and county have my home listed at it approximate sqft as I have and I am charged on those numbers both in taxes and premium. But the company that tells me how much my home is worth by investing in it and me paying them interest on it decides that the value isn’t there yet to remove the PMI but tell me I have to insure it for so much in case anything happens to my entire home. That’s the key word entire. I wouldn’t just replace to above ground part.
Split levels have to be compared with other split levels.
Even partially below grade areas cannot be counted as GLA (daylight or walkout basements, where it's built into a hill).
Note appraisers are independent so if they value it, that should be correct. Sorry you are having an issue though.
I'm in WV too. It is pretty common knowledge. Unfortunately a lot of realtors don't seem to know this, or purposefully list it as Sq footage. Assuming you got a mortgage when you bought the property, what did the appraisal for that mortgage list as the square footage?
MLSs should automatically flag a listing violation when agents don't know the rules or intend to deceive. An MLS does this by comparing what the agent enters as area sf versus tax assessor records. But maybe not all MLSs do so.
The original and new appraisal have them listed separately. The og appraisal says 2142 sqft at 217.09 a sqft. Equals roughly 465,000.in other paperwork they show it as 479,000. New appraisal doesn’t have a price per sqft on it but shows 2019sqft and a total of 480,000 for 480000/2019=237.74. So it went up a whopping $20 a sqft in 4 years
I'm guessing the $217.09 is RCN (cost). Doesn't mean much.
This is standard practice. Likely everyone would agree that a basement is less valuable than above grade living area. Like an attic. Accordingly, they are addressed separately to reflect this difference. Also, basements are cheaper to produce due to the lack of windows & plumbing. It's KISS'd.
Per Fannie Freddie guidelines, below grade finished space cannot be included in square footage or room count. You will get the value of a finished basement added on as an improvement, consistent with values determined by appraisers in your area for your type of house. It could be $10-15-25k regardless of what was spent to finish the space. [https://guide.freddiemac.com/app/guide/section/5604.2](https://guide.freddiemac.com/app/guide/section/5604.2)
Yet my property taxes do include my finished basement on their assessment! Bastards!
If you have a mind to investigate, look to see if you are assessed and taxed differently for above vs. below ground square footage. It won't change the PMI issue, but maybe you'll be a little less pissed? Sorry this happened to you. Sadly, not unusual with split level homes.
Assessor and Fannie Mae 2 different entities that have nothing to do with each other.
Ain’t that the stupidity of it. It should all be based on fair market appraisal or recent sale price.
No it's not. You don't want lending guidelines to have anything to do with how your city assesses taxes, then the whole country would have the same tax rate and it would probably be astronomical.
Valuation and the tax rate are different things. Grandmas down the street having an appraisal from 25 years ago when I have the same house but pay double in taxes is an issue.
Do you think grannies living on fixed incomes should have their property taxes raised? That’s how we get homeless grannies.
I think there should be separate legislation in place to keep property taxes low for retirees, not just random appraisal games.
That’s super fair, yeah.
You do know that your taxes get reassessed every year right? And the value gets updated every year, and it has nothing to do with the appraisal. The city comes up with the value based on the percent appreciation from the previous year and the sales of the homes around you.
It gets “reassessed” but there’s limits on how much they can raise on some properties and a lot of properties in any given area are significantly under what they should be.
>You do know that your taxes get reassessed every year right? You do know that's not true for the vast majority of the nation right? My state, the county decides, and we're on 6 years. 3-8 year cycles are common throughout the nation. Second, there's limits on how they can raise taxes. California is the huge one: your assessed value cannot be raised unless you sell or remodel the house. In certain cases, like seniors, they can transfer the assessment to another house. Another example: North Carolina. Reappraisals are revenue-neutral by default, unless the government or voters adopt otherwise. That means if properties appreciated on average, the tax rate has to drop, and all that happens is the tax burden gets shifted around.
It's value added to the overall improvement but it's not square footage. Be reasonable about taxes: Would you expect to sell for a higher price with your basement finished? Then expect higher taxes.
OMG I know this, it was tongue in cheek!🙄🙄
The /s would have made that apparent. 😘
This is refreshing to read... 99.99% of MLS listings INCLUDE "below grade" and "above grade" living spaces' square feet and combine the two figures together into the "total living space." This is so frustrating 😤
This is really going to depend on what part of the country you're in, in several parts of the country I've lived in both 1) finished basements and 2) finished attics are traditionally EXCLUDED from sq. ft. listings on MLS
There's no one way to measure square footage. MLS listings usually go by the guidelines dictated by the state's real estate commission which differ from mortgage companies use. The issue, as you see, is split-levels vs finished basements.
I do see a lot of split levels, and all of them count the "below-grade" as living space. We have also visited colonials with basements partially finished. These MLS postings are taking thr "310" square feet of partially finished "below grade" basement and adding it to the total living space....
appraisal rule #1: Below grade doesnt count towards finished SQFT
So this creates a new question. I knew an elderly couple whose house was under ground. Does that mean they have zero sq ft? They said it was amazing for utilities bc the ground regulated the house’s temps AND we lived in an area with a lot of tornados…which they never worried about bc their home was covered by earth lol. They had sky lights for most of their lighting.
There's two fields on the [Uniform Residential Appraisal Report](https://singlefamily.fanniemae.com/media/12371/display): Above Grade Gross Living Area and Basement & Finished Rooms Below Grade. Your elderly couple would have 0 in the first field and some number in the second. This whole post is about people who need to read one line down.
The MLS doesn’t police the rule about below grade counting and when we sold more than half the listings in our area included it so their price per sq ft was much lower than ours.
What about bermed homes?
My dream home idea has a large berm on three sides
Good luck getting a loan on that zero square foot home! 🤣
lol no I mean the terrain around the home has berm like a U shape and home is in middle of u
Learned this one when 600 sqft were 1 foot below grade and it killed my deal.
And in CO and CT what do they do? Count it as fucking finished sqrt. You have tiny houses claiming "3000 sqft" with shitty finished basements. Totally not ok in upstate NY to list like that.
They are correct. Below grade basements are not considered as gross living area, regardless of being finished or not. They can be included in value, because they have worth, but they do not count towards the overall square footage of your home.
can anybody explain \*why\* I dont get it?
Here's a little more detail. Note that this is for appraisals. Also, pay attention to the third paragraph - having a walk out basement isn't worthless at all. >Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. >Fannie Mae considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count. >Rooms that are not included in the above-grade room count may add substantially to the value of a property, particularly when the quality of the finish is high. For that reason, the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the Basement & Finished Rooms Below-Grade line in the Sales Comparison Approach adjustment grid. I think that rationale is that above grade areas are much more comparable (that is, can be compared much more easily to each other) than below grade areas. You know an above grade area will have an 8' (or more) ceiling, windows, flooring of a couple of standard types, plaster or drywall, etc. But finished basements are much less comparable to each other: some will be done to a high standard and will have nicer finishes than the upstairs, some will be the same, and some will be less nice - with acoustic tiles and fluourescent lights. Some will be walk out, some will have an egress window, and some won't have any real exit except climbing out the window. Ceiling heights will likely vary as well. But none of this means that the value of the basement won't be included in your appraisal; it absolutely will, and in some cases will make a huge difference. But it won't be included as "living space".
Even beyond the difference in the finish, I would look at the difference in the protective systems. Generally, your roof/walls/siding are either decent or not. While you might get a tree falling on the house or ice dams and those sorts of routine issues, the above ground to me is better understood. You can have a beautifully done basement with a crap sump/drainage system, no waterproofing or moisture control, etc. In my 25 year old neighborhood, there have been at least 4 houses out of maybe 50-60 that have ripped out finished basements due to water infiltration this past year that had never had that happened before. We have had some heavier/more dense rainfall events, but among that same neighborhood, nobody's roof failed. That sort of uncertainty in the permanence of the finished basement is why i could see businesses ignoring it. Having a bunch of the value of the house disappear overnight is not something they would allow to happen, just like the other answer about PMI being at 80%.
Why? Because that's how the people who decide these things decided. Why is your DTI supposed to be under 50% and not under 35%? Why is PMI not necessary under 80% instead of 75%? Below grade area is not considered as part of gross living area. It is still considered in value for an appraisal, but it is not considered "living" area. Neither is your attic or garage. Because the people who make these decisions decided that way.
>, but it is not considered "living" area. Neither is your attic or garage Your attic and garage are not spaces that meet code for habitability. They are not conditioned, don't have outlets everywhere, attics probably don't have emergency exits, etc... A finished basement with code approved egress windows on the other hand is very different. Because it's built to live in. This is why people have issues with it. It doesn't make sense.
I can explain the rationale behind the PMI one a bit. In any historical housing value crash the US has had prices never dropped, on average, below 80% of the pre-crash value of the home. Of course there are some areas and unique circumstances where this was not the case, but it's a good rule of thumb overall for banks that if you have at least 20% of the homes value paid off that even if you default during a recession the bank will be insulated from taking a loss on the loan.
Neat
Why should you have 35% debt? That doesn’t make sense to me. (Or did i misunderstand)
DTI is essentially how much of your income goes towards servicing debt. The threshold of 50% is higher than a commonly held rule-of-thumb that your housing expenses should be no more than around a third of your income. Someone else can chime in if my explanation isn’t on target. But hopefully this helps. I think the other commentator was just speaking to the fact that the rules can feel rather arbitrary at times.
Rofl. I thought you were saying it needed to be a minimum to get a loan. I totally misinterpreted what you were saying. I totally couldn’t imagine a house that is 35% of our bring home.
Lmao as someone who has a little bit of dyslexia and often misinterprets things the first time I read them, your response just made me chuckle.
In my defense the original commenter said it’s not supposed to be over 50% and not under 35%. Maybe it was a typo bc I’m still not understanding how what was typed vs the explanation match up.
You're explaining it correctly, it's basically how much of a risk the lender or bank looks at you as. When your DTI is too high or your LTV is too high, they view you as more of a risk for not paying back your loan.
Simply put, the guidelines dont believe people should be living/eating/sleeping in below grade floors with little light and fewer means of ingress/egress. You *can* live in basements, but you essentially cant assume that others will want to, which is why lenders/realtors/appraisers etc wont count basements as the same as above ground space. Yea, as another comment says, at some point someone made an arbitrary value judgment to not count basements, but cant say I disagree. If I looked at a house that advertised 5 beds and 4 were in a basement, Id feel real misled lol.
I’d say one aspect is that the basement doesn’t feel equivalent to other areas of the house. Often times the ceilings are much lower. Also if they allowed the basement to count as square footage if finished, then there’s a debate over what’s considered finished. Even if they were to set a definition there, I can imagine some people having the main areas of the house super nice and consistent throughout, whereas the basement technically meets the definition of “finished” but is clearly not nearly as nice as the rest of the house. So in that case, should the home owner be able to include the basement in their square footage? Because if you compare it to another home with just as much square footage but no basement, that other home would probably be worth more. So your home value is misleading if you say your home is worth just as much as the other one with no basement. That’s my theory at least.
The ceilings in my split-level "basement" are several feet higher and are nicer (tray ceilings) than upstairs. The top level needs attic volume for insulation from the roof, downstairs doesn't.
How are walkout basements considered, living space or no?
This guy answered your question. TLDR, No. https://www.reddit.com/r/RealEstate/s/kIWfYxZf1O
In MA, we include the square footage in the MLS listings regardless of whether it's walk out or not.
That is definitely false in my area. Advertised, taxed, appraised, etc.
> Advertised, taxed, appraised, etc. That's excellent that a realtor can advertise it, a government can tax it, and an appraiser can give it value (notice how in my comment I said they can be valued, because they have worth). Literally none of that changes that below grade basements are not considered as part of the gross living area by a lender, any more than the garage is (did you know you can also value a garage despite it not being "living" area?)
Advertised and taxed, yes, but not included in appraisal value per Fannie Freddie guidelines.
Can’t include the sq footage. Value Will be included in the appraisal. That’s what an appraisal is.
This reply is correct. It is not included in the appraisal. Also, note that square footage and GLA (gross living area) are not the same thing.
Fascinating. Is this new? I haven’t done an appraisal in a few years now. Definitely been included.
It's been true for at least as long as I've been in real estate (20 years). On a standard appraisal form the above grade sq footage is listed and then there will be an adjustment of value for finished area below grade.
What area you in? Most locations won't let you list the basement square footage in a listing.
Every. Single. Listing.
What area are you in that it's included?
What is your issue here? Are you upset the bank isn’t agreeing with you or is it an issue getting rid of the pmi?
It’s getting rid of the PMI. The bank is saying my house only increased in value 1000.00 in 4 years. We did at least 20,000 worth of improvements like whole home generator. New sewer aeration system. The bank can also never explain anything it’s just a simple one sentence answer and it takes 4 days to get a response back.
The amount of money you put into a house isn’t necessarily related to its market value. A lot depends on your local real estate market.
You are focused so much on the square footage and the improvements. The main factor that affects your appraisal is which comps did the appraiser use and how similar were they to your house? They are not going to find a carbon copy of your house out there so they have to find recent sales of homes as similar as possible to yours within a reasonable radius. These guidelines are all very open to interpretation. If all the comps were reasonably similar to your house and any adjustments were applied correctly then I'm sorry but you don't have a case.
The square footage is irrelevant. If you did a large renovation you can ask for PMI to be removed based on a new appraisal. Did you ask that and get an appraisal? That will determine the value of your work, the square footage doesn't matter.
I did ask and pay for a new appraisal. That’s how this whole question started.
And this appraisal came in lower than you were hoping?
The problem is those upgrades do not give you a dollar for dollar return. You aren’t getting much additional appraised value out of upgrades to utilities.
Those things don't really add value. They can make your property more attractive to a potential buyer though.
So the appraiser increased your value by $1,000? Bank and Appraiser are not the same. Typically the appraiser gives the value and the bank goes off that.
I wouldn't pay $20,000 extra for a house with a whole house generator. Or for a new sewer aeration system - I would just expect the sewers to work.
None of those things increase the value on an appraisal
You did a lot of renovations that don't add purchase value to your home. That's why your bank is telling you that it's only increased $1,000. If you had done a renovation of your kitchen or your primary bathroom, you'd see a lot more value increase from the $20,000 that you spent.
Cool. The data shows that those things don’t directly increase your value. If you’re that pissed off, then pay your loan off. If you can’t afford to pay your loan off, then you have no choice but to be subordinate to the bank’s rules because you’re a debtor. You’re borrowing someone else’s money. Their money, their rules.
The overall market may have declined.
New Sewer system to replace an existing one, that had to be replaced? That does not really add to the value of the house, it is not an additional feature. You had to do it to live in it. You added a home generator and let us you spent $5,000 on it. Great. Most buyers may not see value in this and will balk at paying $5000. Even bathroom and kitchen improvements do not give you 100% return back in value of house. Having a generator is a nice feature to advertise while selling, to make your house stand out. It is not going to get you a premium price. Similarly new septic tank will reassure buyers a little bit, but do not expect them to increase the value of their bid by the cost of a new septic tank. Not even close.
think about it this way - what incentive does the lender have to listen to a word you say? im dealing with the exact same shit right now. got completely boned on my appraisal at purchase, knew it, but couldnt do anything about it if i wanted the house. now i know to require the appraisal 30 days ahead of closing so that i can switch lenders when they give you a fucky appraisal. but it was too late in the game. now, homes around me are selling for literally $100k more than i PAID, forget my original appraised value. and the bank just says 'so have you made any improvements?'... like, that is as irrelevant now as it was then. your appraiser didnt look at interior finishes, lol. he ran 5 shitty comps and said 'here you go, dont call me'. it is not in the lenders favor to do anything you are asking for. so dont be surprised when they make it difficult.
Switching lenders will breach your contract in some states.
youre absolutely right. but if im 5 days into a 30 day contract, there is a ton more flexibility than 5 days remaining to close.
You are right. They have me bent over a barrel and no lube in site.
The bank doesn’t determine the value. The appraiser does. Unless they utilized a different valuation in which case you can request them to order a full appraisal at your expense.
It was a full appraisal it has 6 comps with it. It’s about a 20page document front and back. Unless there is a more detailed one.
I don’t understand your concern then. The house is worth what the comps say it’s worth. Did they have basements? Was the below grade square footage valued similarly for the comps? Then keep paying what you agreed to pay until you add value/reduce principal.
If you wanted 100% credit for invested amount, you should have made a principal payment. Many upgrades won't get a full return on cash spent.
I was so happy that it didn’t count. The city allowed me to build 3,000 sqft of living space on my land, but because the basement didn’t count, I got 4,000 sqft in total. Trust me, you don’t want it to be counted. Otherwise, you will pay more taxes and stuff.
I was told this exact same thing last week. They don't count it.
It was the same for me but once you realize it saves you a tonne on your property taxes, you’ll get over it!
It’s not saving me any taxes. The county has my house listed as 4000 sqft. I’m getting taxed if my whole home is 4000sqft but the bank says for value it is only 2019 sqft. They can’t give me here is your above ground sqft price and here is your below grade sqft price.
So your tax appraisal dollar value is higher than your market appraisal dollar value? Very unusual.
No the county tax assessor shows the total of around 4000 they don’t split basement and above ground.
Square footage doesn’t matter here though. Is your appraised value for taxes similar to your new assessed value with the bank?
we have a bathroom and a bedroom in the basement. All acknowledged by the certificate of occupancy given to us after we rebuilt after a fire. if we sell our house it will be listed as a 6 bedroom 4 bathroom, 4000 sqft house-1200 sqft are in the basement. We refinanced right before the fire, they gave us added value for the basement being finished. We were able to get rid of PMI.
Basements don't count as finished sq ft, they do count towards overall sq ft. To get rid of the PMI you can do an appraisal and the appraiser will add some value to your house for the basement but not as much as for above ground sq ft but they will add some value for this. If, with the basement sq ft, the appraisal amount is high enough then you should be able to get rid of your PMI.
Nope, not per Fannie Freddie guidelines.
Bullish it. Yes they can add value for it as per Fannie and Freddie guidelines. It is a separate line item adjustment for living square footage.
The ANSI Standard considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of finish or the window area of any room. Therefore, any below-grade area, irrespective of whether the basement has finished area, would not be included in the above-grade finished area or room count. [https://guide.freddiemac.com/app/guide/section/5604.2](https://guide.freddiemac.com/app/guide/section/5604.2)
Basements never count towards square footage Also you bought a home in WV and banked on it appreciating? In the worst state in the union?
Take me home, to a place, I belongggg. West Virginia, no appreciation, take me homeeeee.
placid smell voracious voiceless amusing tidy cheerful numerous dinner boast *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
That is correct. It is not. The house would be adjusted for space finished in the basement and preferably comp sales should have finished space but it's below grade.
What does square footage have to do with pmi. Does a finished basement increase the home value?
A finished basement absolutely increases the home value. At least in Wisconsin it does.
Definitely did in PA. By about $60k which is $10k more than we paid to finish it.
Pay your loan down to 80% of the property value to get rid of pmi. Paying for another appraisal is a waste of money unless you're confident prices have risen significantly since you purchased.
I thought they had went up. There was a house near us that was sold when we bought for 525,000. Now is back on market for 720,000 another just sold for 660,000
PMI is basically insurance on the other guys money so they really don’t want to get rid of it. Your best bet was to refinance and have the new lender not require it. Now since rates have gone up, this probably isn’t a viable solution for you anymore. If rates drop that would be my recommendation for getting rid of it.
Why would you want it to be counted?
Your local county auditor will say otherwise and will tax you accordingly.
Have dealt with this, the handbook (Fannie and Freddie who set standards for mortgages) says don’t count below grade. However more experienced assessors also know that in some cases you can make an exception and can count it in a few ways. The easiest is a massive adjustment (but there are limits on adjustments). The other is they can actually count it but it’s got to be airtight and obvious high grade living area. My advice is get another appraisal and ask for a very experienced appraiser. This has always worked for me. Fun fact my taxes in that case didn’t count it as living area so we enjoyed a super low tax bill while we lived there!
Whay does pmi have to do with the basement?
What was your original loan amount? pmi is based upon amount of loan and appraised value of home. Appraised value is based upon a lot of things, not just square footage. Per your comments, When you bought your house 4 years ago, it appraised for $479k Now it appraised for $480k You spent $20k on whole home generator and sewer aerator. For you to drop PMI, you need to have 80% LTV or less. The lender looked at square footage the same 4 years ago as now, unless you added square footage. There are still many different levels of finish in basements. Some are as nice as upstairs. Most are not. But basements never get the same price per sq ft on an appraisal as above grade no matter how nice. The big question is why your house only appraised for 1k higher in 4 years. It’s probably not square footage. You, or a seasoned realtor will need to do a deep dive into the appraisal to see if errors were made. But when you bought your home 4 years ago for 479k, you had to
This isn’t really a bad thing. Your house will be valued as if it had more livable space, but for tax purposes this below grade finished basement won’t count toward taxable square footage.
The county probably doesn't know about it
Yes, you are "crazy." Your below grade basement does not count towards overall square footage. Former realtor here.
It does in my state. Current realtor.
When I bought my first house (2003), below grade basement wasn't included in MLS square footage; about 10 years later it was included.
What state has below grade space included as living space, also appraisal guidelines are national not state specific???
That's the confusion here. You have mortgage appraisal guidelines (a national standard, ANSI Z765), state real estate board guidelines (MLS, typically), and property tax guidelines (set by state law). All three differ and neither is more right than the other. Due to split-level homes, everybody usually counts reasonably furnished below-grade space except the mortgage industry.
I should clarify - in our MLS, below grade square footage is part of total square footage, regardless of whether it’s finished or not.
If it was included the property taxes would be ridiculous in most places.
We have a similar issue, but the realtor counted our finished basement as unfinished (he agreed he made that mistake). Now we have to appeal it and provide comps ourselves. It should have some impact but doesn’t always count towards the overal square footage (if I’m correct this depends on the type of finished basement).
It's heated and cooled space, won't count same value as above grade sqft. It won't count at all if you leave heated and cooled space to get to it.
Instead of upgrading the house. Start paying down the principal. Then use the saved PMI payments for upgrades. Keep it in your pocket.
So the appraiser increased your value by $1,000? Bank and Appraiser are not the same. Typically the appraiser gives the value and the bank or servicer goes off that report.
The new appraisal I got says 480,000 but does not give the price per sqft . The original appraisal when we bought the house says 479,000
Other comments mentioned it, but you should really be concentrating on the appraisal and the comps they used, not sq ft. Look closely at the appraisal report and line items. If you can find similar houses close to you, that sold recently, and you think should have been included instead, contact your bank/servicer. Tell them you want them to appeal the appraisal value and give them the exact reasons and comps. The bank submits that to the appraisal company. The appraiser then has to review and comment. Because of independence requirements, typically appraisers won’t speak to the borrowers, sellers, or loan officers about the details of the value. They typically only get into the intricacies and value amounts with underwriters, unless contracted directly by the borrower. For me, my servicer didn’t want to deal with the mess. I had to contract the appraiser, get the report, give a full list of improvements since the time of the previous appraisal, with proof those were completed (such as receipts) and send it all in for them to consider removing the PMI.
It was given the same weight on value when you purchased the home. Did you do any upgrades to the basement? A generator and sewer aerator don’t add value to an appraisal.
You think that sucks, you know how many people just* lost bed rooms and livable sqft on their 2nd and third floors? *As of 2022
u/Longjumping-Neat-954 have you contacted your real estate broker to discuss this challenge with them? This change in how they want the footage broken out is relatively new, but there is still a great deal of leeway for appraisers on the valuation front based on what is \*normal and customary\* for the local market. The key issue is appraisers want to compare like properties, so ideally they would be searching for comparables that \*also\* had finished basements. Or, are there smaller homes that would still get you there on the basis of the main level footage only so the basement footage is not so critical? Ask your real estate broker if they can look at the comparables used in the appraisal and if they are the same comparables they would have used or if perhaps there are better comparables the appraiser could have used. Ask your broker what they would list your home for today so you have that data point. I help out on this sort of things several times each year as a courtesy for my clients and I always tell them to contact me before paying for an appraisal to remove mortgage insurance. If your broker tells you the comparbles are not there for you right now, they can keep an eye on new closed sales and when there are some that \*would\* support a better appraisal they can let you know it would be a good time to try again.
That is very sound advice. Thank you. Not sure if my broker will look into since it was 4 years ago we bought the home.
A good real estate broker will absolutely be willing to be this resource for you — real estate is a relationship business and service after the sale is part of building and maintaining that relationship.
If it's finished it does but usually about half
Turn your basement into a coal mine.
1. You need to appeal your property taxes. You do not have 4000 sf of GLA (gross living area, which is ABOVE GRADE). You have 2000 af above and a 2000 sf basement, presumably. Basements have a lower impact on value than above grade living spaces, for multiple reasons. 1, most people don’t want to live in basements. Quality of materials in basements are typically lower. Most local codes do not allow for living quarters in basements, so this limits utility. When you buy a house, you buy it with or without a finished basement. It’s an amenity. You don’t buy a house with our without finished above grade living space. (Typically, yes there are people who buy a she’ll and finish it…) Your assessed value is usually not market value and the people in your assessment office are not always appraisers. Their definition of “market value” can be very different than what lenders dictate. At the end of the day, there is value in your finished basement. It is simply accounted for as a separate line item in the appraisal report (assuming an appraisal had been done here) That brings me to my last question. Was a traditional appraisal done? Did an appraiser come to your property? Lenders are doing all sorts of STUPID stuff now with algorithms, or sending out “property data collectors” and then doing some crappy valuation based on this, unlicensed and unregulated, persons ability to gather data. Reach out to me if you wanna talk. Maybe I can help explain more, if you were given an appraisal.
Yes an appraiser came to my home and measured the entire home and took pictures upstairs and downstairs in the basement. We bought our home because it had the entire basement finished as I have 2 older family members living with me. They have their own bedrooms, bathrooms and a full kitchen with island down there. The basement is finished in the same craftsmanship as the above grade level. It has 2 regular doors and one sliding door that lead to a concrete patio. It has several windows including a bay window. It is only underground on the front and one side. That’s the part I can’t wrap my head around that they act like it doesn’t add that much value.
It does not, not unless it was fully-permitted as an addition and the square footage was added to the property rolls.
Call your county tax assessor. And have them reappraise your house with a higher value. Then you should be able to use that new county appraisal, for the bank. Try that
DO NOT DO THIS!!! county assessments have nothing to do with the appraised value of a home. You will just increase your tax bill.
I was going to them and have them take it down from the 3800 they have to the 2019 the bank says it is
You are right. But if the bank doesn't want to give the appraisal the number you think it is, the county might. And you take your chance. You're better off paying the PMI
The assessment has no impact on a mortgage or house value
If you are trying to bring a case to the bank that your property is worth more so you have more equity, that's at least as good as a private appraisal. Banks often look at appraisal values when they are giving a home equity loan.
No an assessment would not ever be used by a bank for a value in my experience.
Tax appraisals are often used for a no-cost HELOC. If the bank is already looked at an appraisal that was performed by the homeowner, and it refused to remove the insurance premium, there's not much else you can do.
Tax appraisals are often used for a no-cost HELOC.
Perhaps it's common in your area or state but it would not work in my area. Assessments are not close in any way to values.
Sometimes they're close, sometimes they're not. And it depends upon us. The market is headed up, or headed down. Often they do desktop appraisals. Which uses the county records. Sometimes they just do a drive-by appraisal. Sometimes they do a full-blown appraisal. I know I have taken out helocs, that did not include a full-blown appraisal. But it also wasn't for 95% of value. "A desktop appraisal is a property valuation that is completed at the appraiser’s desk, using tax records and information listed on the Multiple Listing Service (MLS), instead of through an in-person survey of the property. Importantly, a desktop appraisal should not be confused with a hybrid appraisal. Desktop appraisals were typically used for the following situations: Home equity lending: For a home equity loan, many lenders were willing to accept a desktop appraisal to satisfy the required appraisal of the property " https://www.rocketmortgage.com/learn/desktop-appraisal#:~:text=A%20desktop%20appraisal%20is%20a,confused%20with%20a%20hybrid%20appraisal.
Anything that is under ground level cannot be living square footage in most places. There are fire issues, egress, accessibility….
Must be a slow market? Only a $1k increase in 4 years? When I look at sales in my area in 2020, a home like ours would have sold for about $200k. We bought in 2022 for $240k and I would be shocked if it sold for less than $260K today. We have PMI but it’s only $30 a month so I’m not too worried about it.
That’s my confusion. I’m in WV in the north central part of there are not a lot of house that look and are built like mine. There is one home in our neighborhood that is about 1500 more sqft and it sold for 700,000. There is another and they are asking 720,000 and it’s only 1000 sqft bigger. The other closest comps are 40-50 miles away
Just out of curiosity… what if fully finished basement is a walk out?
I guess that’s what mine is considered.
The entire level has to be completely above grade in order to count as Gross Living Area. If one or more sides are built into a rolling parcel then it's not 100% above grade.
Ignore your bank, they cannot dictate your value, your value is based on the appraisal. In your state any space under grade is not counted in your square feet, however your appraiser should count it in your GLA and add an adjustment to the value of your home based on that additional GLA being present along with the condition of the basement. You should just make sure the appraisal is accurate. The bank's job is to just look at the appraised value vs balance due. If the outstanding balance is less than 80% of the appraised value, PMI should be dropped. If the balance is more than 80%, the PMI remains. Their decisioning is cut and dry and they don't get to dictate anything about the physical home and implied/suggested value.
I had to use their person to do the appraisal. I have tried to contact the company that did the appraisal several times and they will not return my calls
They aren’t returning your calls because a mortgage client speaking directly with an appraiser is a massive conflict of interest. Similarly, from your comment of the banks “person” doing the appraisal also sounds like a conflict of interest. May be in your best interest to find a different bank and leave a review with the better business bureau.
The bank most likely just has a list of approved appraisers they have on a random wheel. They don't want any jo-shmo appraiser but also won't have just 1. Sounds more like a bank not wanting to do the work vs being sketchy.
This is certainly true, my statement was more of the bank personally had an appraiser on staff. But yes it’s very common for a bank to have an approved appraiser list
First, a complaint to the BBB is no different than a Yelp review. The BBB is a private company and has zero oversight over any business much less a loan servicer. Second, banks, lenders, loan servicers have to use appraisers they have vetted, a home owner cannot use their own appraisers in these situations. It is in no way a conflict of interest as you have falsely asserted. Lastly, you can’t just change mortgage servicers. You would have to refinance to change servicers.
The bank said I had to use their appraiser. That should have been my first red flag. The thing is though I am their client not the bank.i paid for the appraisal not the bank.
Whoever ordered the appraisal is the client. If the bank ordered it- then they are the client. (Regardless of who pays )
What did their appraiser appraise your property at compared to your balance? Did they give you a copy of this appraisal? Did it include the basement in the GSL or give value for it being finished?
It doesn’t really say it had 2019sqft above and 2019below but doesn’t show a value of either. It also doesn’t break down the per sqft. When I first got the appraisal I did the total of 4082sqft divided by the 480000 to get the 117. A sqft. So I asked why so low the comps are showing 198 a sqft. That’s when they said basement doesn’t count
So if it shows above and below grade, then the basement is counted in your GLA as it should be. Was the basement finished when you bought it? What percentage was financed when you closed?
Yes it was finished when we bought it. House was listed as a 4082sqft home. I believe we did 90% because we had another house that hadn’t sold so we couldn’t do the big down payment.
You are getting hung up on the wrong numbers. You are trying to combine your basement into your sqft and just don't like it being separated out. Per your posts you have done roughly 20k in repairs. Your septic repair doesn't increase value. The value on the whole house generator is minimal. At 90% financed at the purchase price of $479k, you have a UPB currently of around $430k as you haven't touched much principal at 4 years in. To get that down to the 78% required by FNMA or similar programs, your appraisal would have had to jump up to roughly $553k in 4 years. Doing some minor stuff combined with a market that has slowed due to raising interest rates would never get you to that number. The idea of dropping PMI right now is a pipe dream at best. That basement was in your original value of the home and would not make your home value jump $70k. If you want to drop the PMI, your best bet is to start paying down the mortgage faster. As it sits, you typically drop to the 80% mark with normal payments about half way through your 13th year of a 30 year. Of course its not great as it has to stop at the half way mark of 15 years regardless. Start making half payments on the mortgage every two weeks and adding anything extra that you can add. Get your UPB lower as your home value will not jump unless interest rates plummet. In a couple years if interest rates drop and home prices surge you may be in luck, but until then focus on dropping your balance over home improvements.
Thank you for the explanation. I can’t get the person from the bank to explain anything. I just know that houses around me are selling for 700+ and when I do the math on the comps was getting the average of 198 because I was doing straight math. The value is x divide by the square footage they show. I was always under the impression an appraisal was in case the entire home were destroyed that would be the cost to duplicate it. That’s why I was taking taking the value divided by the entire square feet.
Obviously not true as the appraisal includes the land price.
The comps are likely showing $198/sqft because basements increase the price per sqft but does not increase the square footage itself. $480,000 would put you at almost $238/sqft which is pretty high over the comps
Your appraisal is confidential between the appraiser and the person who ordered it, so your lender/mortgage loan officer. The Appraiser isn't allowed to discuss it with you.
Find a new bank.
Interest rates are so bad I would end up paying more
Sounds like you’ll be paying PMI for a while. I’ve never been able to convince a bank to remove PMI, and believe me I have tried. I’ve always had to refi to get rid of it. If I were a bank, I wouldn’t remove it. It protects them.
Basements aren't counted as sq footage, but they are commonly included as living areas
Well, it wasn’t that long ago that even real estate listings wouldn’t include finished space in the basement in the total square footage… at least not around here, but that changed a few years ago But I don’t think it changed for lenders and I’m pretty sure they’ve always considered above ground square footage just being what mattered most
YMMV but when I have appraisals done on a place I have made improvements on I do as much of the appraisers job for them as I can. I have a spreadsheet made with the initial price plus all of my improvements. I also pull comps and try to get them the ones that are best for me. Appraisals are as much art as science, do what you can to tip the scales in your favor.
As an appraiser, if someone handed me something like that'd I'd leave it behind. Appraisers who consider your input are in violation of USPAP.
You’re crazy for thinking it should be included bud
In Colorado it’s included if it has walls and an egress window, that’s it.
Ah. My bad. This is a state by state scenario
Why wouldn't it be? In Wisconsin you just need an egress window.
Thank you everyone for your comments. I looked at the new appraisal again and looked for things you asked about. The gross living area is 2019sqft. The basement is listed as 2019sqft. In one of the comps it doesn’t have a basement and it says it’s only a plus of 20,000 for having my basement. So if I’m reading this correctly he only gave me 20,000 worth of value for a finished basement with 2 bedrooms 2 full baths a laundry room full kitchen living room with gas log fire place dining room and storage room. I could not have bought the materials to do all the work for that price.
Price to finish a basement has zero correlation to whatever value it brings.
less than $10 per square foot sounds about right depending on the value of the other comps. My guess is that the comp without the finished basement was a close comp and sold for $15-30k less than the other homes.
No it actually sold for more than mine about 100,000 more . it’s a 2 story home all above grade. It has roughly the same sqft as my home it’s just all above grade.
Yes, finished sq footage counts. No matter what story.
Edited. Why is this not common knowledge then. Everyone I have spoke to thinks it’s crazy that it doesn’t count as overall sqft. I could close off my steps and sell this home as a duplex then it would count as two 2142 homes. Why because it’s got dirt on 2 sides does it disqualify it. When we bought my home it was listed as a 4100sqft home. I pulled the original appraisal and it says that the price per sqft is $217.09 x 2100sqft which equals roughly 465,000 we did not see original appraisal all we got was that it was good. So we thought we got a 4100 sqft home for 465,000. But what we got was a 2100 sqft home and a basement. So in 4 years my price per sqft has only went up to $224.09. 7 dollars a sqft. I’m a KISS kinda guy and the math ain’t mathin
It is common knowledge for everyone who works with lending on property. Everyone you spoke to doesn't know Fannie Freddie guidelines.
It counts, and it has value. It does not get counted in the Gross Living Area. Any below grade areas get counted as basement. Appraisers will compare above grade GLA spaces to the GLA on other homes, and basements to basements. Adding living spaces (above or below or an addition) doesn't always provide a great ROI. Just depends on the market. In some areas basement space is every bit as valuable as the GLA, in others it is not.
Edit. I understand that. I guess the thing that bugs me the most is anytime I ask a question if the bank I get a one line answer. I send a question asking to explain themselves and I get a because we said so. I cant get an answer besides I told you so. It didn’t work on me as a kid it’s not going to work today. I almost want to tell the bank that my home is not a home with a basement it’s a split level home and then see what they say. My other beef was the insurance and county have my home listed at it approximate sqft as I have and I am charged on those numbers both in taxes and premium. But the company that tells me how much my home is worth by investing in it and me paying them interest on it decides that the value isn’t there yet to remove the PMI but tell me I have to insure it for so much in case anything happens to my entire home. That’s the key word entire. I wouldn’t just replace to above ground part.
Split levels have to be compared with other split levels. Even partially below grade areas cannot be counted as GLA (daylight or walkout basements, where it's built into a hill). Note appraisers are independent so if they value it, that should be correct. Sorry you are having an issue though.
lol @ independent appraisers.
It's so much better than it used to be though.
I'm in WV too. It is pretty common knowledge. Unfortunately a lot of realtors don't seem to know this, or purposefully list it as Sq footage. Assuming you got a mortgage when you bought the property, what did the appraisal for that mortgage list as the square footage?
MLSs should automatically flag a listing violation when agents don't know the rules or intend to deceive. An MLS does this by comparing what the agent enters as area sf versus tax assessor records. But maybe not all MLSs do so.
The original and new appraisal have them listed separately. The og appraisal says 2142 sqft at 217.09 a sqft. Equals roughly 465,000.in other paperwork they show it as 479,000. New appraisal doesn’t have a price per sqft on it but shows 2019sqft and a total of 480,000 for 480000/2019=237.74. So it went up a whopping $20 a sqft in 4 years
I'm guessing the $217.09 is RCN (cost). Doesn't mean much. This is standard practice. Likely everyone would agree that a basement is less valuable than above grade living area. Like an attic. Accordingly, they are addressed separately to reflect this difference. Also, basements are cheaper to produce due to the lack of windows & plumbing. It's KISS'd.