Have you ever had your home appraised? Upon reading the report, you find that it appears that the appraiser’s bedroom and bathroom count are incorrect?
As an appraiser, occasionally a homeowner will call me and point out that my report does not reflect the accurate bedroom and/or bathroom count. My first thought is that I may have missed something. However, most of the time, upon double checking my work, I realize why there is another reason for the confusion.
There are two types of bedrooms and bathrooms. You might be wondering how that can be, which is completely understandable. Let’s look at an example. How many bedrooms and bathrooms do you see in the sketch below?
If you said, two bedrooms and one bathroom, you’d be correct. What about when you add the following basement rooms to the count?
With the addition of this area, if you said that the home has three bedrooms and two bathrooms, you’d probably be correct. I say “probably” for a reason. I’ll get to that shortly.
This bedroom and bathroom count seems basic. And it is. However, when it comes to valuation, things are not always so cut and dry. Why? Because sometimes, the contributory value of a bedroom or bathroom in a basement is different than that of bedrooms and bathrooms that are above-grade.
I know that this may be hard to believe. By the way, there are cases when the contributory value is the same. However, at least in my experience, they’re usually different. Ask any real estate appraiser, and they are likely to say the same. We may see this difference clearly in our analysis. However, it may not be as obvious to the reader of the report.
Due to the potential for differences in the contributory values of above grade vs. below grade bedrooms and bathrooms, on most appraisal reports, which are reported in a form format, you will notice that the bedrooms and bathrooms of a home are separated into two types. Above grade and below grade. Here is a picture of a Fannie Mae 1004 form where you can see what I am saying.
Did you notice the wording on the report, to the right of the room count? It asks for the “Finished area above grade” room count. The word “above” is also in bold, to get the reader’s attention. Notice what the General-Purpose appraisal report form (GPAR), which I use for non-lending appraisal work, indicates.
Two different forms reflect the same thing. They both separate bedrooms and bathrooms into two categories. Above-grade and below grade. This helps us to appreciate that this is not simply a Fannie Mae idea. This has to do with value, and measuring the value of above grade vs. below grade bedrooms and bathrooms, which may be different.
Now, here’s where things get tricky. Remember that earlier I said that if you called the room in the basement a bedroom, you’re “probably” correct? Some municipalities may allow for a basement room to be used as a bedroom. In some cases, they require egress of some type. Here are a couple of pictures of different basement bedroom egress that may allow, in some municipalities, for the basement room to be used as a bedroom.
I like the one on the right. It’s a cool view, for not having a view. What if the municipality says that a basement bedroom can be used and counted as a bedroom? That’s awesome! However, it is still a basement bedroom, and would therefore be valued as such by the appraiser. This usually also applies to walk-out basements. There are exceptions to this. I will save discussing those kinds of unique situations, for a future blog.
In the earlier floor plan, this is how it would look on the current Fannie Mae 1004 form, used for mortgage lending. Notice that in the below grade room count, the basement bedroom and bathroom are included.
Here is what the blow grade room abbreviations indicate:
1rr – Rec Room / 1br – 1 Bedroom / 1.0ba – 1 Bathroom / 1o – 1 Other
In this example, value is being given to the below grade bedroom and bathroom. However, it is reflected in a different area than the above grade bedroom and bathroom count. By the way, in this example, the laundry room is finished. Some appraisers may not include a laundry room in the basement room count. In this case, I did reflect it as the “other” room in the basement.
I do hope that it may help clear things up when it comes to bedroom and bathrooms, and how appraisers report and value them.
To end this article, I thought I would share this little video I enjoyed that provides 28 cool basement bedroom ideas. Not too shabby!
I hope that you are doing good and staying safe and happy!
Have a great two weeks! Thanks, as always, for being here.
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Here are some links to other articles and podcasts I’ve enjoyed recently! I hope you will also…
The Housing Shut Down (Bi)cycle Goes In Circles – Housing Notes by Jonathan Miller
A second wave of outbreak & the housing market – Sacramento Appraisal Blog
Five Ways To Identify An Increasing Real Estate Market – Birmingham Appraisal Blog
Newz: New Fannie Update – Street Name Values – Converted Church – APPRAISAL TODAY
June Newsletter – Summer Time is Here While Supply & Volume Show Big Declines in Housing Market – DW Slater Blog
Part II – Does My Neighborhood Really Need Analysis? – Tim Andersen’s Appraiser’s Advocate PODCAST