Fab Real Estate Blog: Pricing Issues: Square Footage

Pricing Issues: Square Footage

When determining the value of a home, your agent will first take into consideration the home's Gross Living Area, otherwise known as square footage.

The Gross Living Area of your home includes the fully-finished, above-grade areas of your home.  Typically not included are basements, attics, garages and enclosed or covered porches.

One of the most common discrepancies I see with homes listed for sale here in the Danbury, Connecticut area is that sellers and their agents sometimes include a finished basement in the total square footage of the home.  Below-grade areas, whether finished or not, are not calculated into the total square footage of a house.

An unfinished basement will add a some value to your home versus a home that is built on a slab, without a basement.  And, of course, a finished basement will certainly add value to your home versus a home with an unfinished basement.  However, basement spaces do not add to the Gross Living Area total for the home, and whether finished or not, basement areas are not valued by appraisers the same as above-grade living areas.

Adding a finished basement's square footage into the total square footage of the home is misleading and deceptive.  Pricing your home based on this misleading figure will result in a price that cannot be substantiated via an appraisal, which is a contingency in most transactions requiring mortgage financing.  Should the buyers and their agent not realize the square footage error and write an offer based on what turns out to be an exaggerated square footage total, your sale will most certainly hit gridlock when the appraisal value comes in lower than the contracted purchase price.

Appraisers and their appraisals protect both the lender and the homebuyer from overpaying for a house.  Appraisers do not attempt to justify contract prices.  Rather, they review the subject home, comparable sales and market conditions to determine an unbiased value of your home.  Again, it should be repeated that whether finished or not, basement areas are not valued by appraisers the same as above-grade living areas.

Some exceptions may apply, such as the lower level of a Raised Ranch-style home being included in the total square footage, if that is customary in your area.  Other local customs may take precedence in other areas, and they will traditionally be applied across-the-board.

Be sure to advertise your home with the correct square footage.  Real estate marketing should be honest and will thus generate the best results.

Comment balloon 15 commentsDon Fabrizio-Garcia • January 03 2007 02:18PM


It is very very rare in Florida to have any kind of basements. But you make an interesting point on square footage. Often the number given by the county is incorrect.Here we calculate the full under air square footage as all areas under air conditioning, then we ahve another number which we just cal Total square footage.It is at time stricky as many convert "lanais" or terraces into living space under air. These may be very basic and border line living space or not.I usually rely on square footage to do CMA as much as other techniques.We also use of course price per square footage.Very informative blog thanks.
Posted by LLoyd Nichols, SW Florida Homes (Premier Florida Realty of SWFL) almost 12 years ago

Any relations to Eddy Fabrizio? This is one of my dad's good friends from Rhode Island growing up. He would be in his 50's...


Posted by Scott Gormley (Oak Valley Mortgage-California Home Loans and Refinancing) almost 12 years ago

Lloyd - Some counties are better than others when it comes to having accurate information about houses.  Here in New England, we're more concerned with "heated" spaces instead of "air conditioned" spaces!

Scott - No relation that I know of.  But if he lives near Newport I'll pretend to be related in exchange for a place to stay...

Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) almost 12 years ago


out market doesn't use square footage! Yup. We don't have squre footage on our MLS sheets. So we learn to comp properties somewhat differently. After a while, you just know that price range.

And, they do appraise out!

Posted by Eileen Landau, ABR, CRS, e-PRO (BAIRD & WARNER, NAPERVILLE) almost 12 years ago
Don, I thought that if a basement was partially above ground that the square footage was calculated at a reduce percentage depending on how much of the basement was above ground.  Did this change???
Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) almost 12 years ago

I've got to think that more information is better than less.  I think prospective buyers and real estate professionals should be equipped with all the information. 

Square Feet heated

Square Feet cooled

Square Feet totally finished

This arbitrary requirement that the basement be banned from calculation is lacking in transparency.  You even suggest that raised ranches may be counted on their lower levels ... so if a basement is 4 feet out of the ground in the rear of the home (what we call daylighted) then the area can be counted?

In our market we compete with bi-level homes.  Do they get a benefit over a ranch style or two story style home in MLS?  That's not open and fair and transparent at all.

Posted by Steve Dalton, Northwest Indiana Home Builder (219-465-8352 ) almost 12 years ago

Eileen - I've seen some local MLS's that do not use square footage due to liability concerns - if a buyer finds out their new home is not as large as they thought, the can unfortunately become litigious.

Do your local appraisers measure the homes to determine square footage?

Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) almost 12 years ago
George - I've heard all sorts of different ways that people try to include below-grade areas into the total square footage of a home.  In some areas, customs may indicate a reduced square-footage calculation based on how much of the basement is above ground, as you indicated.  However, according to national appraisal guidelines, if any part of the basement is below ground, then it is not considered in the gross living area calculation.  Again, local customs may differ, but then those customs should be applied across the board.
Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) almost 12 years ago

Steve - Your local customs may differ from national standards and guidelines.  That is acceptable, as long as they standard in your area.  I'm assuming what you call a bi-level home is what we call a raised-ranch in our area (enter the front door, and you have a 1/2 flight of stairs to go either up or down).

If the lower level of a bi-level is included in that home's square footage in your area, then that should be used by appraisers when comparing it to other bi-level homes.  If style of home is an important value indicator in your area, as it here in my area of Connecticut, then a bi-level home won't be used as a comparable sale for, say, a colonial home, without a corresponding value adjustment for style.  We typically use about a 10% price adjustment for style for a colonial vs. a ranch or a raised ranch (colonials are valued higher as they are the more desired style here).

And, yes, transparency is key.  I like to see in the MLS a comments such as:  "3,500 square foot home plus 750 square foot finished basement."  That's transparency.  More information and more disclosure better serve all of our clients.

Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) almost 12 years ago

Good post Don.  Here in Southern Indiana we list them two ways.  The official square footage(without the basement) is listed in the header.  Then further down the page we have a place for Total Finished Living Space which includes all areas of the house.

On a side note, I always put in my listings that all sq ft is approximate. 

Posted by Brett Mumaw, Your Indiana Move (RE/MAX First) almost 12 years ago
Brett - I agree, we should always note that square footage is approximate.  On our local MLS, we only list gross living area (finished, above-grade square footage).  But you are able to add into comments "additional 600 square feet finished in basement" or something to that affect.  Our tax rolls also list the Gross Building Square Feet, which does include basements and garages.
Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) almost 12 years ago

As a Licensed Residential Appraiser, I appreciate your comments on the Appraiser 's function and responsibilities in the overall transaction.  I would like to further add that what we consider to be living area - vs- basement area is determined by FNMAE and ANSI standards for measuring residential properties.   So we actually do have reasons for what we do, we're not always just pulling something from our behinds!!!


Good Post!!!

Posted by Maryanne McCuin (M & M Appraisal Services) over 11 years ago

Maryanne - Thanks for bringing the professional appraiser's voice to this post.  You are right - there are federal guidelines that appraisers must adhere to.  We need to teach real estate agents what these guidelines are so that we can avoid misrepresenting values to buyers and sellers.  Unfortunately, I find that many agents do not want to hear about federal guidelines.  That is something that brokerage firms need to take up with their agents.

Pricing a home is key for real estate agents - whether they are representing the buyer or the seller.  Square footage is a major issue in pricing.  By exaggerating that square footage figure by including basement areas that will not be factored in by appraisers in the same manner as above-grade areas is misrepresenting the home and potentially leading clients astray.  Misrepresentation of square footage figures can also lead to potential lawsuits.

Basement areas, and how they are factored in to a home's value, is something that is greatly misunderstood by many real estate agents.  More education is needed.  That's part of the reason I have completed all of my appraisal licensing courses.

Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) over 11 years ago

 HELP!!  We are looking at a house that has a finished basement (inlaw suite), bedroom, bathroom, full kitchen and living room area (1000 s.f.)  Main house is 3375 s.f. Unfortunately, when checking the Town Hall, I discovered that the basement wasn't listed as finished and further inquired.  It was never permitted so therefore, they are not being taxed on it.  The Seller is willing to get it post permitted but doesn't want us to be able to walk if the taxes are significantly changed.  That's a problem as I am concerned that the taxes will be substantial on such a large and really nicely finished basement area.  How should I proceed?  Is the basement appraised the same as the upper level or is there a p.s.f. rate that is applied to the basement space.  Then I can figure in the 70% standard that CT uses and possibly arrive at the increased tax figure?   Should the Seller engage an appraiser and go from there?  We don't want to lose the deal but we don't want to get killed due to increased taxes either.  Looking for some direction, PLEASE!



Posted by Mary Hopson over 11 years ago

Mary, I can't tell you how to proceed in your specific situation, as I am not a part of your transaction and may not know all the details.  There are actually a few issues here that you are dealing with.  However, I can provide you with some general information that may be of help.

A finished basement should not be counted in the assessment (or in an appraisal) as having the same value as the above-grade living areas of the house.  I just checked the online assessment database here in New Fairfield, and one home with a partial finished basement had that area assessed at $19 per square foot (this number may be and probably will be different in your town and possibly dependent upon the quality of the work).  The above-grade areas are assessed much higher.  So, the tax assessment on the finished basement should be lower than the tax assessment on above-grade living areas.

As far as permits, it is good that the seller is willing to now have the work permitted by the town.  This will relieve you from any potential future issues if the work is not done correctly or does not meet town codes.  You mention that the basement is an in-law suite with a kitchen.  Is this allowed in your area?  If not, it is possible the town may order it removed.  Does this make the home a two-family home, and is that allowed in the area?  If not, the town may order it removed.  Is the electrical and plumbing up to code?  If not, the town may order it corrected or removed.  Is the electrical and plumbing all behind finished walls?  If so, they town may order the walls removed so they may inspect the work.

Please notice that I've used the terms "may" or "should" a lot.  As I am not representing you in this transaction, I may not be fully aware of all issues.  Also, these issues are really up to the town building department and the town's tax assessor.

Here is what I would recommend:

  1. Talk to the real estate agent representing you in this transaction for advice and direction.
  2. Talk to the attorney representing you in this transaction for advice and direction.
  3. Talk to the town's tax assessor to obtain additional information on how this may affect the home's property taxes.
  4. Talk to the town's building department/zoning department (call town hall to find out who to speak to in your situation) to get their take on the situation.

Get as much information as you can.  Then you will have some choices to make:

  1. Allow the seller to obtain permits for the work. Decide what contingencies are to be negotiated, such as contingent upon reassessed taxes not to exceed $X; contingent upon all permits being finalized prior to closing; contingent upon re-negotiation or contract cancellation if the town requires any modifications to the finished basement area; contingent upon any other issues that may potentially arise in your situation.
  2. Determine what risks/costs you are willing to undertake for this home.  If this is your dream home, then you may be willing to take on some additional costs or risks. (for example, if this is your dream home, you may be willing to risk higher taxes...remember that our homes are usually reassessed every five years anyway, and taxes adjust (usually upwards) every year due to town budgets...)
  3. As an aside, I purchased a new home, expected the taxes to be $X, and upon completion of the home, they ended up being $3,000 a year higher than I planned.  This was due to a recent town revaluation that occurred while my home was being built, and a new town budget - and thus a new town mill rate - that was higher than I was told by the assessor's office to expect.  In other words, when it comes to property taxes, there are no guarantees.
  4. Determine what other issues may arise and negotiate now how they are to be handled.

Buying a home is both emotional and stressful.  Keep that in the back of your mind as you deal with these issues.  Remember to breathe.  Remember to breathe deeply.  Take a break from the issues for a few hours or even a day if needed, so that you can try to examine the issues again with a clearer head.

I hope this helps, and I of course wish you the best of luck with your home purchase.

Posted by Don Fabrizio-Garcia, Owner/Broker/Trainer - Fab Real Estate (Fab Real Estate) over 11 years ago