Hello everyone and Welcome once again to
another fantastic episode hopefully of
Selling Greenville your favorite real
estate podcast here in Greenville South
Carolina I am your host Stan McCune as you
guys all know I am a realtor here in
Greenville South Carolina and I
represent everyone buyers sellers
investors owner occupants everything in
between and you can find all of my
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today our episode is going to be a
little bit different than normal and I'm
going to warn you guys I have my desk in
the standing position because I'm a
little bit amped up right now all right
so I'm not sitting down for this
show I am going to go on a little bit of
a rant perhaps I I don't have any notes
in front of me right now but I'm going
to go on a little bit of a rant about
basement homes in Greenville and this
rant has been brewing in my mind for 5
years ever since I went to Real Estate
School five years ago with Charlie
Wyatt locally
Renown real estate Guru teacher here
in Greenville pretty much everyone
that's gotten their real estate license
in Greenville has had him as a teacher
Charlie Wyatt put this bug in our
ears five years ago when we were in real
estate school we were talking about how
homes are valued and how appraisers view
Homes and we started talking about
square footage that is above grade
meaning you know when they build the
house they build the foundation and then
they they build the house above the
foundation right that's above grade it's
above the ground and then below grade
square footage or what's commonly
referred to as the
basement we were talking about above
grade versus below grade and he said
kind of in passing
appraisers are supposed to consider
below grade that has the same finishes
as above
grade as comparable value which makes
sense if it has the same type of
flooring if it has sheet rock drywall
same quality finishes same Quality
Windows all of those things it should be
deemed of similar value to the rest of
the
house but Charlie said he went on to say
most appraisers will just slap a 50%
value on the below grade so they'll
calculate what the above grade value is
for the basement for for the house in
general the price per square foot so
let's say that they determine for this
neighborhood the price per square foot
on average is $100 a square foot when
they get to the basement even if the
basement is finished and looks exactly
like the rest of the house in every way
they'll just slap a 50% value and so
then in that case it would be $50 a
square foot for the basement so if you
have for instance 2,000 squ foot well
let's just say 1,000 just to keep it
simple 1,000 foot home up top 1,000 squ
foot basement everything looks exactly
the same and the price per square foot
in the neighborhood is typically $100
you would expect it to be a $200,000
house right because you take this sare
footage 2,000 square ft times the price
per square foot 100 and then you
determine from there okay you you
multiply that 200,000 well the typical
appraiser would actually give it a
valuation of
150,000 full value for the above grade
half value for the below grade finished
basement by the way it this goes without
saying but they are only counting areas
that are heated and cooled all right so
so we just need to be particularly
heated so we just need to be clear
about that if if there's a part of a
basement that's that's finished but it's
not heated that will not count to an
appraiser anyway Charlie put that bug in
my
mind and he said that he didn't think
that that was what appraiser should do
but that that's common practice and so
ever since then the 5 years I've been a
realtor I have been paying close
attention to
basement homes and seeing what
appraisers do and guess what Charlie was
dead right every single basement home
that I have looked at an appraisal for
has been given a 50% value relative to
the above grade square footage including
my own home I live in a basement home
I'm recording this in my basement office
right now my basement is finished
just as nicely as the rest of my house I
mean crown
molding the
works with one very very minor exception
and that is that there's a portion of my
finished basement that has vinyl tile
whereas most of the rest of the house
has either Hardwoods or ceramic tile or
carpet my basement has either carpet or
a small section well and there is some
ceramic tile down here and then a small
section a vinyl tile that's the only
thing that is different in terms of
quality downstairs versus upstairs but
but we actually like that that's
actually a feature not a bug to use
technology term that's a feature of the
house because it's easy to clean it's
durable you know if someone you know
if we have a dog which we're hoping to
get maybe in a few months if it
scratches up that tile you know that
it's not going to be a big deal nobody
will ever notice
we've gotten two appraisals when we
bought it one we refi and both of them
gave a 50% value to our completely
finished basement now let me tell you
our
basement is the apple of the eye of
everyone in our neighborhood whenever we
have people come down to our basement
that are in the neighborhood their eyes
light up because it's very unique in in
the neighborhood that I live in there
are not very many basement homes and
among those that have basements that are
big enough to actually have square
footage most of them are not finished
and among the ones that are finished
most of them don't run the entire length
of the house like ours does we have my
office we have a game room we have a
guest Suite we have a movie theater room
it is a very nice
setup okay I can assure you if I listed
this
house I would be hindered by an
appraisal I I can assure you I could get
a value for this house someone on the
open market would buy this house for
more than it would appraise for because
when people would come down here they
wouldn't see oh this is a basement
you know here's what we see a lot down
here a lot of finished basements the
reality is that they don't have similar
finishes if the upstairs has crown
molding the downstairs does not if the
the upstairs has nice you know sheetrock
ceilings the downstairs has ceiling
tiles like you know those industrial
style ceiling tiles maybe not as nice
of Windows this is very very common
place that we see that the the basement
finishes
downstairs in the basement are not as
nice as the rest of the house that's
totally understandable that basement
should not be worth what the rest of the
house is worth
but guess what appraisers more often
than not when they go into the basement
that is exactly almost exactly the way
the rest of the house is they're not
giving 100% value or even 90% or 80% or
even 70% they are almost all the time
giving 50% now there was a Facebook
thread that I was a part of got a
little bit heated at one point between
an appraiser and another realtor
but it it was on a an appraiser and
realtor group that I'm a part of and we
got into a a bit of a debate over what
should what should happen and and how
basement should be handled and a few
people on there said that they had
gotten full a few Realtors said they had
gotten full values on on basements on
a few of the appraisals that they had
had so I know it's not 100% of the
appraisers out there that are doing this
but a large large overwhelming
percentage of the appraisers in the area
appear to not even be considering
anything outside of the basement if it's
a nice basement the highest it can get
is a 50% value now the appraiser that
was on this Facebook thread was very
defensive at the idea that that
that's the wrong way to approach it and
he
you know went to explain that it's
cheaper to build a basement that if
Builders knew that there was all
kinds of pent up demands for basement
they would be building a bunch of
basement
homes what other arguments did he use
he said that you you have to take the
neighborhood into account which is true
obviously but he said that that you
know some communities the basement home
is the standard and they're done very
nice and and it's just it's assumed that
each home is going to have a very nice
finished basement and so it should be
tabulated as a closer percentage to full
value on that basis I don't disagree
with with a a lot of those
points but at the end of the day F first
off let me address the Builder concern
right our area is relatively flat here
we we do have some hills and whatnot but
generally when a builder comes in It's
relatively flat they don't have a lot of
opportunity for for building a lot of
basements around here they used to do
try level homes because we do have some
some minor Hills that are conducive to a
tri level or a split level home that
then has a a basement that is partial
and and this is what I had at my old
house I had a TR level home where so
basically you have have if you don't
know what a tri level home is it's like
a ranch but then you can go upstairs
or downstairs from the main level and
the basement was only below grade on one
side so it it basically wasn't below
grade I mean we had windows on every
side of the quote unquote basement it
did not even feel like a basement we
called it the
den
because it was below grade on one side
on our appraisals for that house we also
got 50% value for the square footage of
of the
den and again finished to similar
finishes as the rest of the house
comparable finishes to the rest of the
house if not nicer in a lot of ways
and it was a bit a bit ridiculous a
bit ridiculous in my opinion
and anyway I again like I said I don't
know where this is going to go this
is a bit of a rant where I was going
with that is that Builders used to build
those those Tri level style homes
with regularity back in the 60s and 70s
around here U those aren't very popular
they're they're kind of split up not
very popular and so it's only logical
that Builders would not be building
those anymore even though our area with
with the minor Hills that we have are
conducive to those types of homes so it
doesn't make sense to me why Builders
the argument that Builders should be
would be building more basement homes
listen they just plug things into a
computer whatever is simple they they
try not to to do anything too crazy we
have a lot of production builders in
this area big National Builders and
whatnot and and so so they are just
looking for a basic model that you know
a handful of models that they can apply
to a neighborhood that is on a slab
foundation and very simple to build
they're not building homes on basement
foundations really at all they're just
sticking to the level areas and building
straightforward homes because I think
that that just makes the most sense for
them to get in and get out get their
money back quickly not try to to do
anything too unusual but there is a ton
of demand for basement homes let's let's
be honest
here the people and and here's the part
of this that frustrates me right the
people that are looking for a
basement are looking for a basement
they're not okay with that basement
being a second
floor or something like that they're not
okay with it being a ranch they want a
basement home and the people that are
okay with a multiple level home a
twostory home a three-story
home I can't think of a single one of
those people that would not be okay with
that Second Story being below grade as
opposed to above grade I can't think of
any of any of them think about it this
way let's say that you're looking for a
3000t home
almost any if you're looking at a home
that is you know 25 years old or newer
pretty much any home that you come
across is going to have a second story
if it's 3,000 squ ft there they didn't
build the past 25 years a lot of 3,000
ft ranch style
homes they're almost all going to have a
second floor and appraiser comes in and
they look look at let's say that that
they are looking at two houses in the
same neighborhood the one house has that
second floor above grade so you have to
go up to go to the second floor and
usually the the way the floor plan is is
you've got on the main level you've got
your kitchen your living room your great
room your dining room all of those
things are on the main level you go
upstairs You' got you might have a
master bedroom on the main as well
perhaps you go upstairs you got all the
other bedrooms perhaps the the master
bedroom maybe the laundry room maybe a
bonus room something like that and
that's the
layout well if they're looking at a
home that has that layout versus a home
that has something very similar but
instead of a of a second floor above
grade they have that second floor below
grade in the basement the appraiser is
just going to give it a 50%
value there's no one that is okay with
going upstairs to a second level that I
can think about that would not be okay
going downstairs to the second level
from the main level it does not make any
sense and so many people are looking for
that cozy basement I mean the reality of
the situation is where we have our movie
theater room that room would be so
much more challenging to create if it
wasn't for the fact that we in a
basement we've got a great closet area
that makes for an incredible we had a
ton of Tor tornado warnings earlier this
year it makes for a great spot for us to
Bunker and hunker down during a tornado
warning I mean there are so many
benefits that you don't think about that
a basement
gives that are so much better than going
to above the house they're easier to
maintain in a lot of ways you got a
pressure wash you don't have to pressure
wash the second floor of your house
you've got a very much easier way to
pressure wash you've got to get onto the
roof or something it's much easier you
don't need a 25t ladder to get onto the
roof there are so many different little
benefits like that to a basement home as
opposed to a twostory home a traditional
two-story home that a lot of people
don't think about but once they have the
basement they realize it and it's it's
such a perk and it's you know what
people love again a lot of the reasons
why people love basements is because
they can make it like a recck room and
then it goes right out into their
backyard again those are not the types
of things that you have when you have
your bonus room on the second floor
versus having your your recck room or
your bonus room or your Den or whatever
you want to call it man cave is you know
kind of an old term that people are
trying to retire whatever you want to
call it
downstairs it gives you more
flexibility and at the end of the day
there are vastly more people looking for
basement homes than I I can't think of a
single person that I've ever worked with
that said they specifically wanted a
two-story home people either want
ranches or they want homes with a
basement and
sometimes people will be okay with
having a twostory home or a three-story
home it's not they don't rule that out
but that's not a park to them they're
not saying oh man I've got to have a
second floor The Only Exception perhaps
would be you know the perk of having a
bonus room on the second floor but I
that's because there aren't very many
Ranch floor plans that have a bonus
room on the main level those practically
don't exist I mean there are some
exceptions I have a listing right now if
you want to look at 114 Chartwell Drive
I have a listing right now that is a
very rare one where they where the
garage where the garage normally
would have been they did a bonus room
instead on a ranch floor plan but that
is the exception not the rule and so
nobody is clamoring for two twostory
homes they're just kind of forced into
getting two two story homes typically
when they need the square footage but
there are a lot of people clamoring for
homes that have nice finished
basement now in talking with the
appraiser again
this was on a Facebook thread so I
didn't talk to him in person I have
talked to some kind of in passing over
the years about this but not in a ton
of
detail
one thing that came up was he wanted
me to to provide data on why I believed
the basement homes were more valuable
than non-basement homes or or at least
that the square footage was of
comparable value below grade to above
grade now he would not provide any
data to support what he was saying mind
you granted I do respect appraisers
100% I get calls let me let me say this
real quick because I don't want people
to think I hate appraisers if there's an
appraiser listening to this getting
riled up that's not what I
want when I have an appraiser call me
and I have this happen usually once
every few weeks and appraiser will call
me and will say hey I'm H I'm running
comps for a property and one of your
listings that you sold popped up in
as I was doing the comp search and I
have some questions for you do you have
a minute I will will drop whatever I'm
doing to help that appraiser because I
want appraisals locally to be as
accurate as possible and I want to do
whatever I can to help an appraiser get
that accurate appraisal because I could
be the realtor representing the buyer
for that property in in theory
obviously he wouldn't be calling me if I
was the buyer's agent but I'm saying
theoretically I can empathize with
whoever the ERS agent is that they need
that appraisal to be good they need that
appraisal to be accurate they want that
appraisal to be accurate all parties
do and so I do whatever I can whatever
is necessary in order to to help
appraisers I try to keep my listings
very accurate I put all my floor plan
measurements in my listings I do a
lot of things in order to keep these
keep these things accurate so I'm not
anti appraiser right I I respect
Appraiser's opinions and they it it's
not easy to be an appraiser there's a
lot of training that they have to go
through and a lot of things that they
have to go through and I
fully understand that I fully respect
that what I don't respect is the idea
that one size fits all that's the part
of this that is confusing to me how an
appraiser can just
ignore data and just say no one size
fits-all and at the end of the day
the appraiser
represents more so the
lender the bank providing the financing
they're they're doing this more for the
bank that provides the financing than
they are for the
buyer unless there's no Bank involved
and so there are some things that
lenders want appraisers to do that might
be contrary to the market or
counterintuitive and I understand that
as well all right lenders are trying to
protect themselves so we have to keep
that in mind that an appraiser might do
some things occasionally that are
counterintuitive because they kind of
have to based on what the lender
guidelines
are but this appraiser that I was
talking to would not provide data he
copped out when asked to provide
data and he told me to provide data and
so I did my best now we have a challenge
in the Greenville MLS and here's what
the challenge is the price per square
foot that the Greenville MLS calculates
is based on the above grade square
footage and there's no place in it where
it shows you what the appraiser valued
the below grade square footage as so if
there's no way for me to look at the
data in the Greenville MLS and say okay
all of these basement homes were given a
50% % valuation and all of these
basement homes were given you know
70% value relative to the the above
grd square footage etc etc there's no
way for me to do that I'm I'm looking at
the data with both my hands tied behind
my back because I'm I'm I'm looking at
an incomplete picture and there's no way
for me to complete that picture and
for me to
really get nitty into the
nitty-gritty of how this all how this
all works how this all plays out you
know where there are instances where a a
basement home was undervalued I'd have
to spend I I mean an incredible amount
of time analyzing
individual properties looking at all
of their
comps at the end of the day I'm not
going to do that just to to prove a
point on Facebook to an appraiser right
and obviously he wasn't going to do
that either even though that data should
have been easier for him that said I
was able to pull some metadata I was
looking at basement homes and running
some some numbers on the basement homes
and seeing what in general they're they
are selling for what the the general
statistics are on basement homes and and
we have a field called in our mls in
Paragon which is a software that that we
enter listings into it's called Full
finished basements now this is a loaded
phrase because again a basement may be
finished but it may not be finished to
the same quality as the rest of the
house you may have like I said ceiling
tiles or not as nice a floor or whatever
the case may be and so again this is why
without me get get going into the
nitty-gritty and looking at all these
individual listings it it's a very
incomplete picture I'm looking at the
picture in black and white and it's a
little blurry and I would much rather it
be in color and and full resolution but
there's just no way for me to do that
without you know spending like a week
going through data so I ran data on
these full finished basements
understanding those limitations that I
just described and what I found out is
and this is intuitive this is exactly
what we would expect the average house
that has a full finished basement has an
average of
4.05 bedrooms so about four bedrooms and
2.91 full bathrooms so about three full
bathrooms
and. 56 half BS or about about you
know not quite a half B
so basically what you can conclude from
this is the average full finished
basement which this is exactly what I
would expect is either four bedrooms two
and a half bathrooms or four bedrooms
three
baths so I ran averages on the past few
months what those are selling for and
then I took the homes that have no base
basement but our four bedroom three B
Homes these are going to be the homes
that have that are comparable in every
other way except for the fact that they
don't have a basement so these are
primarily going to be homes that are
multi-level homes there might be a
few ranch style homes in there but
they have four bedrooms three bathrooms
again it's really hard to compare apples
to apples on square footage because of
how the data is displayed in the MLS
there are some other challenges was
there that I would get into but but
unfortunately this was the best way for
me to do this running the data in like a
twoh hour time frame it took me about
two hours that I was playing around with
this and and concluded that this was the
the best way to do it so I I ran all the
data for homes that were four bedroom
minimfour bedroom minimthree B
with no finished basement at all okay
and here's what I came up with again
we're not looking at price per square
foot because that's a that's difficult
to really get accurate numbers on
with basement homes the sold price for
these homes was
extremely similar extremely similar the
the but actually let me back up for one
second after the averages came out the
homes that were that had no finished
basement were but were a minimfour
bedroom three B ended up having much
better statistics on bedrooms and
bathrooms than the basement homes did so
whereas the basement homes averaged
405 bedrooms the the the ones that in
my data that I was looking at that
didn't have the basements averaged
4.42 or really 4.43 bedrooms so almost
an entire half bedroom more and
3.16 full bathrooms versus 2 91 so these
These are in general going to be nicer
homes than the basement homes we can we
can safely assume that generally
speaking homes that have more bedrooms
and more bathrooms are going to be
bigger and the bigger the home the
higher the value
typically so the basement homes that
I looked at with the full finish
basements they're sold price on average
was
$335,500
400
89 the days on
Market average days on Market was
62.4 if you were looking at the data for
the the four bedroom minimfour
bedroom minimthree b homes that did
not have a basement their average sold
price was
$334,990 for an average sold price
less concessions of
331,000 days so what that comes out to
now again I'll remind you that those
homes just looking at the metadata
without getting deep into it these seem
like these are probably
bigger and in some ways nicer homes than
the basement homes the ones without the
basement simply by virtue of them having
more bedrooms and more
bathrooms they sold on for an average
when you back out the concessions of
about $1,800 Less on
average and in about a week's longer
period of time than the basement homes
did
now that's not foolproof data but I
think that that gives us a little bit of
a
glimpse at the fact that the basement
homes are more
valuable or at least that they shouldn't
be less valuable let me say it that way
there's no way to run I tried and I
tried to run the data a lot of different
ways and there is no way that I could
run the
data and at any point draw the
conclusion from a metadata standpoint
that basement homes were less valuable
than non-basement homes now the
appraiser I was talking to he said well
if that's the case if a buyer is buying
a home that has a a full finished
basement if there's such a market for it
then when the appraisal comes in low
the buyer should just bring more of a
down payment in order to account for
that difference in order to satiate
the lender and then all of us appraisers
will see okay now that the these people
were paying more for the the basement
home even though it appraised lower and
that will raise the prices across the
board for basement homes well that's not
fair that's not a fair standard because
now you're applying again an excessive
standard to basement homes that you
don't apply to non-basement homes so
that doesn't make any sense to me it
that's you know that's the equivalent of
if you have you know if all these homes
are Racers on a racetrack you're giving
them a 5-second head start before you're
letting the basement home onto the track
that doesn't make any sense to me
how you would apply that logic but
unfortunately this is a little bit of a
glimpse into the head of
appraisers they they see the world
differently they're they're not looking
at the real estate market in the way
that the market itself is looking at the
market they're not looking at houses in
the same way that the market is and so
an appraisal is not foolproof an
appraisal is very specific it's
accomplishing a very specific job and
we I I don't want to to say that
appraisals don't tell you accurately the
value of a house because they they do
hold some value in telling you what what
a home is worth but at the end of the
day
if I want to know what the value of a
house is unless it's very unique right
unless it's very unique and I want to
know what a lender what an appraiser
would value a house for I can I feel
like any day of the week I can figure
out a house value On My Own by running
comps I can tell you what the market
will value a house at absolutely now
will that be the same as what an
appraiser will value a house at and and
what A lender will lend on a house no
because as you can see from this
conversation from this rant
appraisers they they do not look at it
the same as the market does and I've run
into this multiple times over the years
but appraisers are there for a
reason they do have to be careful and
and I understand you know appraisers got
sloppy
or lenders allowed them to get sloppy
maybe I should say the lenders got
sloppy in in their standards and whatnot
back you know prior to the crash in in
2008 and so lenders particularly in our
area apparently have been a lot more
conservative since then because that's
what banks want them to be and you just
need to keep that in mind as you're
looking at
homes it's not always going to be the
same what a home is actually worth
versus what an appraiser values it as
that's my rant for today basement homes
are worth more than they are selling for
there is a market out there for them
that is being suppressed by
appraisers there's nothing we can do
about it at this point except as my
appraiser friend said just buy them
with cash which is extremely
impractical but that is it that is
all that is the end of my rant I hope
you guys enjoyed it I hope you guys
learned from it if you have any
questions let me know as always my
contact information in the show notes
give us a rating give me a review
subscribe download do all of those neat
things until next time let's buy and
sell some houses together stay safe out
there
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