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Ask A Realtor: Is It Worth It To Finish My Basement?

It’s about time we standard having a man contribute to this blog, don’t you think?  If you don’t already know, my husband Jeremy is a local Realtor, and he often gets asked questions about getting the most bang for your buck when buying or selling real estate.  He’s going to start answering questions here on Springs Bargains on a weekly basis, so if you’ve got one for him, feel free to send it over!

We’re thinking about selling our house and are considering finishing our basement.  We received a quote for $27,000 to do the job, and I’m wondering if it will add enough value to our house to justify doing it.  It would add a bedroom, bathroom, living area, and about 1200 finished square feet to our 3 bedroom, 2 bath, ranch style house.

Do you think we will turn a profit on the money we spend to finish it, or are we just hoping to break even?  Or is there a risk that we could even lose the money?

As a rule of thumb, a typical home in Colorado Springs would gain about $13-15 of resale value per square foot when finishing a basement. (I would apply this estimate for homes in the $150-300k range) So in this case, assuming a good quality finish, you could estimate the increased value at about $18,000.  In other words, it’s not a good investment in terms of resale if it costs you $27,000.

A couple things might add more value than this standard estimate.  For example, if the home only has 2 bedrooms there may be an added benefit of the 3rd bedroom since 2 bedroom homes are typically difficult to sell.

On the other hand, you may get less value from your basement finish if it’s not done to professional standards or if there are no building permits.  Finishing a basement on an old home with very low ceilings or the lack of at least a three-quarter bath will likely bring a smaller return as well.

If you’re preparing to sell your home, you may want to take a look at my Top 10 Projects To Do Before Selling Your Home to get an idea of some things you can do that would probably bring a better return than finishing your basement.

Jeremy Isaac is a Colorado Springs Realtor at the Circa Group at RE/MAX Properties.  For professional advice on your specific home or situation, please contact him and he’ll be happy to assist you!

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Comments

  1. Great new feature and as always helpful. We were finally able to purchase a home last October after months of searching. As a buyer, I sometimes viewed an unfinished basement as needed storage space or as a way for the home to grow with our family.

    • Stacy, Good point in respect to the storage. Sometimes a finished basement means the only place left to store things is the attic or the garage.

  2. Doing it yourself can save tons of money, if you are handy and can do a nice finish. Just don’t cut corners and really make sure you do everthing right. Or you can contract out those things you can’t do and do the things like, sanding or painting yourself to keep the cost low.

    • Julie, Often the only way to actually get your money back out of it is to do parts of it yourself in order to keep the cost down. But, like you said, it has to be done right. All too often I see DIY basement finishes that are clearly lacking and add very little value to the home overall.

  3. Alice Rouse says:

    Love the addition of Jeremy’s realtor advice to your blog! It’ll be a big hit, I’m sure. I’m so glad you added another feature that is as helpful as this one. Way to go, Carrie!

  4. The next question I’d have would be about a detached garage and the typical value added. We have a 3bed 2ba house on 5 acres with a full basement with a high ceiling (which we plan to finish in a couple more years), and plan to build the garage ourselves this summer (we built the house ourselves about 6 years ago, so this should be pretty simple in comparison). We’d like to add a 2.5 car garage that is near the house, but not attached, and we’ve wondered at what point are we spending more than our potential return. (The real question is whether we can get those load-engineered trusses for storage, or if we should just build rafters.) We’ll likely hire the grading and the slab pour, but we can do the framing, sheathing, siding, etc. no problem. We’ll probably contract out the electrical hookup too, but with us doing most of the work, we can afford really good siding/garage doors/entry door. I’d just like a sense of the cutoff point, if you have thoughts about that.

    Thanks!
    -Laura at TenThingsFarm

    • Laura, Using an average 200k home as a starting point an attached 2 car garage would likely be valued around 7-10k from an appraisers point of view. (any appraiser out there want to chime in?)

      However, the actual impact when selling your home is probably a bit higher than this due to it making the home more marketable overall and increasing the number of potential buyers who would even consider your home. In your case, there would be a slight reduction in value (by comparison) as it will be detached. Keep in mind as well that it is relative to the price of the home – If your home is worth $400k the garage is worth more than 10k.

      I don’t know what it costs to put up a garage, but my feeling is that it would be money well spent in the majority of cases since it is expected by such a high percentage of buyers.

  5. Just a thought here about the basement, although you may not get back all the money you put into finishing it when you sell, wouldn’t having a finished basement appeal to a larger demographic and in turn make your house easier to sell? that alone should make it worth the hit you’ll take on the investment to have your house on the market for a shorter time. when we finish our basement we plan to incorporate as much storage as we can so that we are not giving up that coveted storage space that everyone looks for. Just a thought here…BTW, love seeing you two working together on this already fabulous site! Miss you guys!

    • Melinda, Good to hear from you! If you’re willing to take a small hit on your profit in exchange for a quicker/easier sale then you’re correct because it does appeal to more people. There are other things I’d recommend someone spend money on first though if the goal is just a quick sale… new carpet, upgraded front door, upgraded garage door, paint, updated fixtures, etc.

    • When we were shopping for our home, we visited many homes with finished basements. For us, it had the opposite effect. I really didn’t like the way the basements were finished. Some were partially done with odd walls and doors hiding the unfinished space. Some were done with odd angles and rooms. In some, it looked like some rooms were done professionally, while others were thrown together in uninspired purpose-driven DIY fashion. Only one home had a nice finished basement to my liking, lots of open space and professional throughout, but the house wasn’t in our preferred location. We ended up buying a home with an unfinished basement that we use primarily for storage right now. I am going to hire a professional contractor to finish it (the plan anyway :-) ) with high ratings and a proven track record, and we are finishing it for the primary purpose of family enjoyment. My guess is we “may” see up to 50% financial ROI on the investment if we ever go to sell. So, my verdict on the matter is that a finished basement can provide the needed incentive for a buyer to pick your property over and against another, but only if the basement (as in my case) has a true professional appearance. I would also imagine that having a nicely finished basement would provide additional incentive if in an area with lots of young families with small kids.

  6. What are your thoughts on a basement bathroom as far as full bath vs. 3/4 bath? I would like to finish our basement bathroom with just a shower and not a bathtub (is that the difference between full vs. 3/4?). Would having just a shower be a drawback for resale? We do have two bathtubs upstairs.

    Thanks for any thoughts on this!

    • Michelle, I’m a big fan of just doing the 3/4 bath in the basement. It would be extremely unlikely for that to factor negatively into a potential buyers decision. Additionally, if the basement is small, you may be better using that extra space in a bedroom or family room.

  7. Hi Jeremy:
    Our basement is about 1600square feet, and my husband wants to have an office room down there for himself. I told him to design the room with a closet for future resale purpose as we would be able to list the office room as additional bedroom to the house, however, he rejected the idea, saying he would have no use for the closet in the office room, and the design should be for his used now and not for the future residents. He was kind of furious on this. Also he argued that, in the future, if the new residents want to turn the office room to a bedroom, they could add a drywall to the corner, and easily turn that into a closet space?
    What are your thought on this?

  8. Keyleen, You’re both right in some respects. Your husband is right that it wouldn’t be that hard to add a closet if the room is big enough. However, I would say there are at least 3 good reasons to include the closet now.
    1. If you basement is 1600 sq. ft. you have plenty of space to include a closet w/o taking room out of the office so there isn’t a reason to not do it.
    2. When listing the home, I would not count a room without a closet as a bedroom in the MLS. So, for example, if your home is currently 3 bedrooms and the office would be the 4th, there are potential buyers who will never even look because they are filtering homes by the 4 bedroom criteria. This “rule” isn’t written in stone so some agents may feel differently, but in my mind that is strictly an office/den, NOT a bedroom.
    3. Most buyers want a home that is “move-in ready”. As minor as it is, the idea of having to add a closet right away is a definitely negative.

    • However…if you live semi rural or rural, and have your own septic, you have to watch that. More bedrooms require a larger septic, and that can cost a lot. Just something to keep in mind! If it’s an existing home, they will not grant the permit if the septic isn’t the right size..if it’s a new home then the required size for the septic may be larger. It’s something to ask about, for sure (if you are rural like us!)

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