How much value does a finished basement add?

by Corben Grant on 02 Nov 2021

Finished basements are a very popular renovation for homeowners these days. Not only does it add extra living space to your home, but it is also much more affordable compared to the average cost of an above-ground renovation or addition.

However, one big question when it comes to finished basements is: how much value does a finished basement add to the value of your home? While it's a good enough reason to renovate your basement for your own enjoyment, it's nice to know that money you spent can be put back in your pocket when it comes time to sell.

But there are some considerations you need to keep in mind before considering a finished basement. If you choose to finish your basement in hopes of adding value to your home, the wrong decisions can lead to very little return or even a loss of money. In this article, we will cover everything you need to know about finishing your basement and how it adds to the value of your home.

Not all Living space is created equal

It's true that finishing your basement will add additional usable space to your home, however, not all space is seen equally in the eyes of an appraiser. For the purposes of home value, square footage above grade is seen as more valuable than space below grade, such as basements.

Below-grade living space is considered less desirable because of the limitations of basement space; small or no windows, limited natural light, low ceilings, and cold temperatures add to the idea that they are worth a little less than more comfortable above grade space.

For example, two otherwise comparable homes with the same square footage may sell for different prices if one has a greater amount of living space above grade. Conversely, two homes of the same value may have significantly different amounts of living space depending on how much is counted below or above grade.

How much does a finished basement add to appraisals?

There are a few different ways that appraisers will approach a finished basement, so the amount added to the value of your home by a finished basement will vary. Usually, the value per square foot is lower than above-grade square footage based on the quality of the finish and the number of doors and windows in the basement. The value of your finished basement square footage compared to the other levels may only be around 50% or 70% per square foot for example.

Some appraisers only base their figure on the gross living area while others do not include basement space at all in the total square footage. Make sure you understand how your appraiser arrives at their figure so you can catch any potential errors.

There are many material costs involved in a basement project including exterior wall insulation, drywall, paint, and flooring. There are also the costs of hiring renovators. An average remodel cost can easily cost $10,000+. In terms of a finished basement ROI, the average home can expect around 70% return on the costs of the renovation as an added value upon sale.

Does finishing a basement help when selling?

It’s hard to say if a basement remodel is worth it solely for the purpose of helping to sell your home, especially when compared to other viable options. The amount of value-added by a finished basement will vary and depending on how you renovate it, it may turn off some buyers.

In fact, some buyers may be more attracted to an unfinished basement as they can renovate it to fit their own needs. Often, the desirability of a finished basement will depend on the local real estate market.

Types of basements and how they affect the below-grade appraisal

There are a few different kinds of basements and can receive different appraisal values. Here are the three major varieties:

Walk-out basements

A walkout basement is considered the most desirable basement in terms of value. For a walkout, a portion of the basement is entirely uncovered and usually includes a full-size door to the outside, making it more like a ground floor than a basement. In addition, this type of basement allows for full-size windows and more natural light.

In terms of outdoor space, a walk-out basement also allows for a patio or sitting area, adding a lot of appeal to the outside of your home. This style of basement can also give you a lot of options for creating a basement rental unit or in-law suite.

Partial grade or garden-level lot basement

A partial grade or garden-level basement is something of a mix between a walk-out and a more traditional basement. A garden-level basement features larger windows and more light than a standard basement, without the benefit of the walkout's full-sized door.

Standard lot basement or full basement

This is your run-of-the-mill basement and it's unmistakable. A standard basement is fully under the ground meaning foundation walls on all sides. Besides small basement windows high up on the concrete walls, there is very little natural light. This type of basement is less appealing and also less likely to be finished, so may provide lots of opportunities for renovation.

Uses for your finished basement space

If you plan on doing a basement remodel, you hopefully have some plans for your newly usable lower-level space. It’s important to keep the actual use in mind before finishing a basement, especially if you are doing so to increase your property's value. If you finish your basement in a way that is only intended for a very specific use, you risk turning off potential buyers.

One of the easiest and most common uses is a guest bedroom for visiting friends and family. Another popular choice is a more accessible and bigger laundry room.

A games room or playroom for kids offers extra recreational space while keeping noise or clutter away from the primary living areas. This is particularly popular for people with young children or those who entertain often.

Another popular basement renovation is a home gym or workout room. If you go this route, you can actually save a lot of money by avoiding gym memberships. When building a home gym, you will likely want solid flooring, bright lighting, and perhaps a larger doorway for equipment to get into the room.

A home theatre is a very popular addition to a home and can be the source of a lot of enjoyment for a long time. The most extravagant of home theatres may include some specialized construction for things such as installed seating, specialty lighting and sound systems, or a projector and screen.

If you choose to create a home theatre of this style, there is a good chance the room cannot be used for other purposes without major changes.

One popular renovation these days is the home office. A lot of people are looking to create working spaces at home and to keep them separate from their everyday life. While finishing your basement is a great way to gain an office space without intruding on your home space, consider that poor lighting and potentially shoddy wireless reception can make a basement a somewhat dreary and frustrating place to work compared to the main floor.

Finally, you may opt to turn your basement into a rented apartment or in-law suite. This will require the most work of any basement project, as you will need to install facilities such as a kitchen and a bathroom. You also need to make sure your apartment complies with local laws for things such as egress which is why a walk-out basement is ideal for this use.

In terms of value, this renovation is great not just for the appraisal value it adds, but for the regular rental income you can collect. One downside is, you lose the use of the space when you are renting out the unit and you turn its maintenance into a constant job for yourself.

Considerations when finishing your basement

The first thing you need to consider when looking at finishing your basement is your renovation budget and how much you want to do yourself. The benefit of working on your own renovation is the potential to save money. However, your project may take much longer and be of much lower quality which could affect appraisal value.

Next, you need to make sure you get any appropriate construction permits before you begin any work on your basement. Failing to do this can cause you a lot of headaches down the road when you try to sell.

When it comes to designing your basement, some things you need to consider are the amount of lighting, the height of ceilings, and what material you want the flooring to be. If possible, try to get trim, doors, paint, and flooring materials that match the main floor. This will help with your appraisal value.

Also, consider potential water issues that are common in basements and whether you need floor drains or a sump pump. It would be a shame to see your new renovations destroyed by water damage. Tile flooring may be ideal for a basement that has water issues as it is more resilient to moisture.

Final Thoughts

A finished basement is a great idea and investment if you plan on living in your home for more than a few years. It’s a great way to make a home feel truly yours and you can gain a lot of comfortable, versatile space that can be outfitted for whatever purpose you feel like. In terms of adding to your home value, finishing your basement will generally have a positive effect on resale value and the renovations are inexpensive compared to other major projects.



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