At some point every realtor that shows houses has been asked about return on investment for a finished basement. The question usually comes in the form of How Much Value Does a Finished Basement Add?
Of course, the answer is, it depends? Factors like geographic location, type of foundation, quality of finish, number of bedrooms and functionality all Impact resale price. Some of these factors are within your control While others simply are not. Let's take a closer look at these factors by starting with those that are not in your control.
Type of foundation
In areas that have basements as foundations, there are essentially three types. It's important to mention that from an appraisal standpoint above grade square footage is valued at a higher rate than below-grade square footage. Here is a look at the three types of Foundations and how they Stack Up from a valuation standpoint.
- Full basement - This type of foundation consists of basement walls of equal Heights for the entire circumference of the basement. These foundations work best on flat Lots. The bad news for full basements is their valuation is lower than their counterparts.
- Garden-Level - this Foundation features some above grade square footage and generally some windows above grade as well. We see this type of foundation lots that have some Contour and a little slope. Of course, because of the above grade square footage, the garden level basement is worth a little bit more than the full basement.
- Walk Out - this type of foundation works best on sloping Lots. The high side of the lot has full-height basement walls and Foundation generally tapers to completely above grade at the lowest point of the lot because of the abundance of above-grade square footage this type of Basement foundation receives the highest return-on-investment.
We start by focusing on Foundation type and its value because at the time of appraisal this is what truly impacts the return on investment. In other words, when you re-sell your property, the appraisal will dictate your ultimate return on investment.
Geographic Location
Another uncontrollable factor is location. Different parts of the country yield different return on investment for a finished basement. Remodeler Magazine publishes cost vs value reports, here is their breakdown of cost vs. value for the same basement finish project in different parts of the United States.
| Market | Job Cost | Resale Value | Cost Recouped |
| National Average | $43,112 | $33,911 | 79% |
| Atlanta | 39,690 | 30,000 | 76 |
| Boston | 49,383 | 43,802 | 89 |
| Buffalo, N.Y. | 41,854 | 14,100 | 34 |
| Chicago | 49,071 | 45,427 | 93 |
| Cincinnati | 42,147 | 30,450 | 72 |
| Cleveland | 45,720 | 24,372 | 53 |
| Columbus, Ohio | 41,527 | 9,076 | 22 |
| Dallas | NA | NA | NA |
| Denver | 39,627 | 22,407 | 57 |
| Detroit | 44,276 | 24,897 | 56 |
| Houston | NA | NA | NA |
| Indianapolis | 41,902 | 22,000 | 53 |
| Kansas City | 41,688 | 21,250 | 51 |
| Los Angeles metro | 47,834 | 62,084 | 130 |
| Los Angeles | 48,136 | 83,835 | 174 |
| Orange Cty, Calif. | 47,532 | 40,333 | 85 |
| Miami | NA | NA | NA |
| Milwaukee | 44,786 | 28,883 | 64 |
| Minneapolis | 48,103 | 34,083 | 71 |
| New Orleans | 36,893 | 30,790 | 83 |
| New York metro | 46,483 | 42,426 | 91 |
| Passaic, N.J. | 47,808 | 35,500 | 74 |
| Nassau-Suffolk, N.Y. | 48,666 | 35,333 | 73 |
| Fairfield-New Haven, Conn. | 42,975 | 56,446 | 131 |
| Norfolk, Va. | 33,619 | 27,750 | 83 |
| Orlando, Fla. | 36,845 | 26,182 | 71 |
| Philadelphia | 45,593 | 34,795 | 76 |
| Phoenix | 39,855 | 25,833 | 65 |
| Pittsburgh | 43,433 | 33,250 | 77 |
| Portland, Ore. | 44,072 | 32,667 | 74 |
| Providence, R.I. | 43,529 | 25,200 | 58 |
| Sacramento, Calif. | 45,967 | 35,000 | 76 |
| Salt Lake City | 37,298 | 26,300 | 71 |
| St. Louis | 45,291 | 27,167 | 60 |
| San Antonio | 37,937 | 34,032 | 90 |
| San Diego | 45,809 | 41,250 | 90 |
| San Francisco metro | 51,428 | 68,659 | 134 |
| San Francisco | 51,428 | 67,100 | 130 |
| Oakland, Calif. | 51,428 | 70,217 | 137 |
| Seattle | 45,981 | 36,317 | 79 |
| Tampa, Fla. | 35,141 | 20,750 | 59 |
| Washington metro | 37,743 | 30,606 | 81 |
| Washington, D.C. | 40,133 | 47,667 | 119 |
| Baltimore | 38,046 | 19,276 | 51 |
| Richmond, Va. | 35,050 | 24,875 | 71 |
(Courtesy Remodeling Magazine)
The Good News
Fortunately, there are certain things you do control that can help increase the value of your basement.
Let’s start with functional space, bedrooms and bathrooms are always a safe bet when you finish a basement. Appraisers and home buyers look for functional utility in a basement and bedrooms and bathrooms score high on the functional utility scale.
Another good idea that's not quite as functional as bedrooms and bathrooms is some sort of Great Room Space. The less specialized this space is, the better because buyers will tend to define their own uses for it.
Quality
It's really important to make sure that the quality of the basement is on par with the quality of the main level. Shoddy workmanship and inappropriate material choices can turn your basement into more of a liability than an asset. It's also essential that you not over improve your basement. there is a cost to Value ratio you need to keep in mind for any basement finish project. It’s best to keep your basement budget below 10% of the existing home’s value. Staying between 5-10% is ideal.
Appraisal
Appraisers value finished basement space at a lower rate than above grade square footage generally 50% to 60% lower than the main level square footage. It's essential you keep this in mind when planning your basement finish project.
You shouldn't finish your basement expecting to get every dollar back. Because of this fact it's important that you have a good reason to finish your basement. This is the kind of project you do so you can enjoy living in your home or because you simply need more space.
Before commencing on any basement finish or remodel project it's important that you talk to a Realtor about re-saleability. You don't want to have that basement where people walk in and say “ what were they thinking?’
Comments(2)