Would you say that a large lot adds home value? What about having a sizable basement?

While the seller might tell you that these things increase a home’s value, lenders and appraisers have a different take. A home’s appraisal won’t take this extra space into account if it’s below grade or related to lot size.

What Does Below Grade Mean?

Above grade square footage is the typical living space within a home, while below grade square footage is the lower level of a house. This usually includes areas like basements and recreational rooms. Below grade rooms are not appraised as highly as above grade square footage. Whether below grade rooms are finished or not, this space will not be appraised with the rest of the gross living space area.

How Is Below Grade Appraised?

If your house isn’t on a flat lot, you might not be getting an appraisal that includes all of your living space. Some homes may not have basements, but instead have rooms that sit below grade. In this case, the home value is significantly decreased. Any below grade footage will be considered a basement rather than living space. Even levels that are partially below grade will not be recognized as part of the gross living area.

What About Lot Size?

Just because your property is on a large lot doesn’t mean the bank will place a high value on the land. Lending companies like Fannie Mae and Freddie Mac focus on the value of the home rather than the amount of acreage.

How Does This Affect Me?

If you’re thinking of selling or refinancing, this form of appraisal can come as an unpleasant surprise. And when it comes to dealing with lenders, there’s little you can do. Some have suggested re-doing the landscaping in order to expose the below grade level and get a fairer appraisal.

What are your thoughts on the issue?