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 contact information in the show notes if you need to reach out to me if you want to get together if you want to talk real estate if you just want to shoot the breeze if you discover that this show is not on the podcast app or platform that you like to use let me know that as well because we're trying to be on as many platforms as possible not just Apple Google play audio boom Spotify I'm trying to get on to Amazon that that one's a newer one that's a little bit weird anyway if you search selling Greenville and we're not in the podcast app that you use let me know and I'll try to get it on there and just a reminder as always as well make sure that you subscribe to the show so you don't miss any future episodes and give us a rating we love to see those ratings as many stars as you can afford hopefully you can afford all five stars and go ahead and and download episodes if you so desire particularly if you're going on a plane or whatever the case may be do all those things to help push the show up in the algorithms particularly in Apple's algorithm so that more people get to hear this and more people get to network with me and get to learn about Greenville that helps all of us as as more people learn about Greenville and learn about real estate around here 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 [Music]