Understanding If A Finished Basement Adds Value To Your Home

A handful of sellers, and even homeowners who are just thinking about selling in the next few years, wonder if going through the time and expense of finishing a basement is a value-add improvement. Generally the answer is yes, but that doesn’t mean that a finished basement is always the best way to invest your home improvement dollars.

When it comes down to home value, finished basements unfortunately are not as valuable as main-floor living space and above-grade bedrooms (“above-grade” refers to a room that’s located higher than ground level — that could mean on a main floor or upstairs, just not in a basement). Generally speaking, a main-floor addition will most likely be way more valuable than a finished basement, but the expense could be much higher.

Should I Finish My basement?

Whether you should finish your basement or not typically depends on your lifestyle, your local Orange County real estate market and your goals in completing the space. As an example, let’s say you’re a movie fanatic and don’t plan on selling for another few years.

Building a home theater in your basement might well be worth it for your own good and entertainment. You’ll see an average 70 percent return on investment, and the 30 percent you don’t make up might feel worth it when you think about the years you will be able to enjoy the basement theater prior to selling.

Types of Finished Basements

There are three main types of finished basements. Which type of basement renovation you choose varies based on your home’s existing structure and how much money you are actually willing to spend.

Walk-out Basement

Typically, the most attractive to home buyers because of the amount of natural light, a walk-out basement has a full-size door (often a slider) that leads to outdoor space, such as a backyard or patio. This type of basement is similar to a ground floor (due to a property with at least 6 feet of slope from front to back), which also gives an opportunity for bigger windows and more natural light — something buyers love.

In a home with a walk-out basement, the main floor will be at street level in the front of the home but elevated from the back, often with a porch or deck. Understand that in some markets, the MLS will count walk-out basements as above-grade when it comes to calculating the price per square foot.

Standard Lot Basement

This is what you may think of when you think of a conventional basement. A standard lot basement is underground, with concrete basement walls and no natural light other than small window wells near the ceiling. Additionally, a standard lot basement generally pushes the main level a few feet above ground, so there might be a couple of steps to get down from the main floor into the backyard. Given the small amount of natural light, a standard lot basement is less attractive to potential home buyers at resale.

Garden-level Lot Basement

A middle ground between a standard lot basement and a walk-out basement, a garden-level lot basement is a bit above ground and a bit below ground, due to a somewhat sloping lot. Furthermore, a garden-level lot basement may have a combination of full-size windows and small window wells, but it’s not likely to have a door to the backyard.

Finished Basement Return On Investment

As with any HUGE renovation, it’s essential to note that when completing a basement, you may not recoup all of your investment. It’s generally suggested to finish a basement for your own enjoyment, then recoup some of the money spent down the road when you decide it’s time to sell.

That said, there are buyers that actively seek homes with finished basements. And in a competitive buyers market, your home can really stand out among other for-sale homes if it is one of only a few with a finished, functional basement.

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