-Yes

-Unlikely

Your chances of being screwed are high. Bank might claim it's not a house because it has no kitchen.

I b believe that the guidelines are changing - and that the square footage "counts", albeit at a lesser $/ sq foot. I also believe that a walkout changes things, as does how common basements are (we're finally getting with the program in North Carolina as more houses are getting "lower levels"... ;-) )

I don't think that the appraiser could say that you "didn't have a kitchen", but they would have a heck of a time finding comps. You are essentially building a unicorn, and bank's don't like those.

Don't let the tail wag the dog. Build the house that meets your needs and responds to your site. I lived near an earth sheltered house (Benzie County) and I don't think they had any problems.

It counts as value but not gross living area.

And yes, do a quick Google search on all the people who couldn't sell their split entries because appraisers were applying the standards to strictly and suddenly saying that they had no kitchen or no bedrooms. Here's one of many:

https://www.trulia.com/voices/General_Area/gross_living_space_for_a_split_level_-51308

"I have a split level and I an appraiser listed the lower level as a basement, yet also listed that no part of the home is below grade. Not only does this not even make logical sense, but by claiming the first level as a basement the livable area is cut in half and he did not claim the bedroom and bathroom on that level."

An article:

https://www.getloans.com/below-grade-square-footage-gets-erased/

Fannie Mae's phrasing has since been updated, but you must prove such a home is customary in your area as being considered gross living area.

From the comments:

"I live in MD, and a similar thing happened to me. I have a raised ranch built into a hill. My kitchen is in the fully finished lower level, which is below grade on the front but has a wall of windows with a gorgeous view on the back. My appraiser told me my newly renovated kitchen doesn’t exist in the eyes of Fannie Mae because it’s on a partially below grade level. He told the bank I need to install a kitchen in my upstairs level for my loan to get approved!! Does anyone have any similar experiences??"

The earth sheltered houses got screwed at the same time.

edit: jannicone, I don't blame you for your disbelief. It's pretty nuts, isn't it????

Milly, despite what you believe, you are not the expert in every single thing. As Janni said, things are changing. The first article you posted is from 2008 and the person asking the question was from MD. The second is from 2010.

To the OP, I think that homechef has given you some good advice as it probably depends on other homes in the area. Please let us know what you find out.

DH and I tried to buy a berm house/earth sheltered house in Missouri in 2014. We were denied a loan by three banks because they didn't consider it a house. FWIW, YMMV.

Our appraisal included "above grade" and "below grade". Gross living area ONLY included above grade. However, the summary of the sales comparison approach includes language that the appraiser "used a weighted analysis with the most weight placed on Comp #2 as it was the most similar with regard to overall square footage". That means that the below grade sf does figure into the appraisal, but only because the comps are similar. I'd guess at least 50% of the homes here have walkout basements.

In an ideal world I would find three comparable homes nearby that had just closed that were similar in design, square footage, age and finish with a finished walkout basement. That's why we make adjustments. Life never gives us three perfect comparable homes to use. Recognizing the differences and appropriately adjusting for them is the art of the appraisal.

Yes, in an ideal world, with a competent appraiser. Depending on professionalism and common sense is a losing bet too much of the time.

I didn't have any issues with our refi. But I found too many who did near me. Don't want to rely on luck. Or professionalism. Lol.

Counting a level with a kitchen the same as a basement kitchen can really bite you in the butt. And if it isn't in GLA, banks usually won't put it in the room count--even with appraiser notes. Hence the people who couldn't get the loans.

I am adding insulation to the outside of my house. That adds square footage under ANSI. Isn't that nuts?

Thank you, everyone, for the comments. I've been looking through Google trying to find a more definitive answer (to tell the truth though, I didn't realize this configuration was called a split-level.) Most of my findings have been inconclusive.

It seems like there are areas of the country where walkout basements are likely to be included in the GLA, but not in others. I understand that while it is possible that the basement may not be included in the GLA, but that actual square footage could still add value at equal or partial value as above grade.

It also looks like many/most articles and threads that I've seen talk about this issue tend to be from 7-10 years ago, so I was wondering if things have changed at all in the last few years.

I know that many homes in the area have walkout basements, it is very common. I'm not sure how they are assessed though. I will have obviously have to do some follow up, but I wanted to see what people's take on this might today or see if any Northern Michigan folk might find this thread and have some insight.

Anyway, thank you again and please feel free to post new comments or continue with previous. It's good seeing that the discussion is happening today and not 10 years ago.

Walkout basements are never GLA under any system. Not ERC, not ANSI, not Fannie Mae, not FHA/HUD.

I think you're confusing what realtors will list vs what banks and appraisers say.

I am a Realtor and most of the homes I sell are on a lake and most homes have a walk out lower level. In most areas this would be called a basement and we refer to them a walk out lower level. Most homes have the "basement" finished very nicely with bedrooms and living rooms.

I have 2 appraisals (prepared by State Certified appraisers) in front of me and both homes have a walk out lower level and both PLUS all comps had zero square feet marked in the "basement and finished rooms below grade" section of an appraisal. The lower level is also used in the "sale price/gross living area" section of the appraisal to determine sf price.

I have many other appraisals on file and am pretty certain that every one of them will include the "basement" as gross living area on the appraisal.

Then your clients are lucky they live in an area where the rules are flouted.

I am not saying the rules are right. Im just saying that when there are instructions in black and white not to count something as GLA, you're rolling the dice to DEPEND on it being counted.

FHA/HUD at least put below grade rooms into the room count!

So why could a house with a basement bedroom with an egress window count the bedroom as a bedroom? If that technically doesnt count as living space? I think the whole idea is ridiculous. If you have insulated, finished, conditioned living space in your basement, it is living space. Their technicalities are downright wrong. Why does a kitchen or a bathroom HAVE to be above grade? Technically it would be safer against wind storms below grade. There will be less demand and price is affected, but that doesnt mean the house doesnt have a kitchen. Seriously.

Just a note, people up north tend to have basements, so you have better luck up north getting it counted as living space.

Agree completely Vith, this issue drives me nuts. Banking, appraisal and real estate practices of valuing "below grade" space is antiquated and needs updating. Topography, windows, retainage and finishes are ignored in too many valuations.

My present home and my past home both had walk out basements and they were not counted in the square footage. That is sometimes a good thing, because no mater how wonderful the basement is fixed up, the tax appraiser could care less. Lower taxes.

Craig - Did you ever build?