How Much Value Does a Finished Basement Add?

✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.

With median sale prices on the rise by up to 3.7%, sellers receive more than their asking price. A finished basement can add nearly 10% to the value of your home. This means the time to renovate your home is now!

A well-finished basement often attracts potential buyers to consider your home. However, before you decide on a basement renovation, take a moment to consider the associated costs and how to get the most value out of it.

What Are Finished Basements?

Finished basements are areas below ground level that are fully renovated to become livable spaces. They are complete with insulated walls, flooring, ceilings, and the necessary electrical and plumbing installations.

Types of Basements

1. Walk-Out Basements: These have a door directly to the outside with one or more walls fully exposed to the exterior.
2. Look-Out Basements: Partially underground with windows that look outside but no doors.
3. Cellar Basements: Used mainly for storage and utilities, not intended for living space. These usually are unfinished.
4. Full Basement: Extend under the entire footprint of the home, potentially available as living or storage space when finished.

Finished basements vs. Unfinished basements

Finished basements are fully renovated spaces that are heated, cooled, and as comfortable as the home.

Unfinished basements, on the other hand, are basic structures with exposed beams, concrete floors, and walls, used mainly for storage and housing utilities.

How Does a Finished Basement Add Extra Value?

A renovated basement adds to the home’s value and improves its appeal. Here are some ways in which a finished basement adds value: 

1. More Living Space: A finished basement adds to the usable space in the home. It offers you the flexibility to perhaps turn the space into an office, gym, or even an additional bedroom. 

2. Potential Additional Income: The extra space that the basement adds can be used for rental income if the buyers wish to do so. 

3. Functionality and Aesthetics: A well-designed basement can add to the functionality and aesthetics of the home. For example, walk-out basements or basements with lots of natural light make for charming recreational spaces.

4. Increased Buyer Appeal: Buyers may take more interest in your property with a finished basement as it gives them an extra living space.

Costs and ROI for Finished Basements

The cost to remodel a basement can be between $4000 to refinish the basement and up to $100,000 for a high-end basement remodeling. However, the actual amount you spend on a basement remodel depends on various factors. Some costs you may have to consider include:

1. Waterproofing: Essential for damp basements. Costs vary with the severity, sealants used, and drainage systems.
2. Structural Repairs: Foundation and support repairs add significant expenses. These vary based on safety and structural integrity needs.
3. Electrical and Plumbing: Necessary updates or additions vary in cost based on complexity and existing infrastructure.
4. Insulation and HVAC: Key for comfort and safety and includes adding/upgrading heating and cooling systems.
5. Walls, Floors, Ceilings: Finishing costs depend on material choices and labor for installation.
6. Design and Aesthetics: High-end finishes and custom designs significantly impact overall expenses.

On average, a finished basement can add anywhere between 10-20% to the home’s value. However, this depends on factors such as the location of your home, the quality of the finish, local demand, buyer’s preferences for a finished basement, and the type of basement.

A finished basement can provide about 70% ROI. While a dollar-to-dollar return may not be the case, the additional living space, flexibility, and functionality add to the saleability of your home.

Factors Affecting Cost of Basement Remodeling

The cost to remodel basements can vary significantly based on the following factors:

1. Basement Size: The larger the basement the more expensive it’ll be. Average costs range from $25-$65 per sq ft for mid-sized homes, while high-end finishes can reach $150 per sq ft.
2. Condition: Unfinished basements are more expensive to renovate considering amenities have to be added.
3. Labor Costs: Costs vary nationally. Professional basement remodeling contractors who understand building codes and enforce compliance are more expensive to hire.
4. Conveniences: Adding conveniences and features to the space can increase costs. For example, adding a bathroom in your basement can cost up to $12,500 whereas a home theater may cost up to $30,000. 
5. Permits and Inspections: You need to obtain permits for electrical upgrades, plumbing changes, and structural modifications when remodeling your basement. However, costs for this vary across regions.

Important Things to Consider Before Beginning a Remodeling Project

Before you begin your basement remodeling as part of your home improvement project take these factors into account.

1. Local Laws and Codes 

Before starting your basement renovation project, research local codes and laws to ensure your project meets building codes. Laws vary depending on the region, state, and city, so make sure to verify them with local authorities. 

Some features that your space would require to be compliant with codes are:

• Emergency Egress: Emergency egress window ensures a safe exit route in case of emergencies. They must meet specific size and accessibility requirements.
• Dimensions: Compliance with code-required dimensions ensures that spaces are usable and accessible. Dimension requirements vary across regions.
• Lighting: A functional living space must be well-lit. Adequate lighting is essential for safety and usability.
• Air Circulation: Codes specify ventilation requirements, like windows and HVAC systems to maintain healthy indoor air standards.
• Electricity and Plumbing: Electrical and plumbing systems must meet specific codes to ensure safety. Compliance prevents hazards like fires, flooding, and health risks.

2. Market Demand 

The value a finished basement adds to your home depends on the current market demand for basements in your area. If there is a high demand for additional living spaces in your area, you are more likely to get better returns on your investment. 

Generally, the market demand for finished basements is higher in colder areas with prolonged winters. However, in warmer areas, basements are less popular due to moisture-related issues.

3. Layout 

When you plan to renovate your basement, consider elements such as windows, storage options, and other functional elements like a kitchen or recreational area. As a result, the cost of your project and the value a finished basement adds to your home will depend on these. 

4. Time 

Renovating a basement is also a significant time investment as it takes about 5 weeks on average. So, consider if you have the time to invest in such a project as it would also prolong the sale of your property. 

Should You Renovate Your Basement?

While in general, a finished basement can be a good investment that increases the value and saleability of your home. However, it is a project that requires substantial time, money, and other resources to complete.

A more affordable alternative to basement remodels is a deep clean. This prepares the space for staging and sale and helps save on the cost of finishing a basement. However, a well-planned and executed basement can yield good returns.

Regardless of your choice, you can rest assured that you will be able to find the right buyers at Houzeo. Houzeo is a flat-fee MLS platform with advanced technology that makes the sale process smoother and quicker.  

Frequently Asked Questions

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