How Much Value Does a Finished Basement Add?

A finished basement is an increasingly popular investment by homeowners. It immediately increases the amount of living space, allowing people to create home offices, additional bedrooms, and play areas for kids. Finished basements can also potentially increase a home’s resale value, helping this investment pay off in the long run. 

The impact that a finished basement has on home value depends on a variety of factors. Asking, “How much value does a finished basement add,” is complicated because there are so many moving pieces.

This guide will dive into factors like location, project scope, and the purpose of the space to better understand its potential value. Use this information to guide your project plans.

Factors That Influence the Value of a Finished Basement

The first step is to evaluate the scope of the project, including its potential costs and benefits. While extra improvements (like building a bathroom) might cost more, the long-term value benefits might be worth it. Here are a few elements to evaluate as you develop your project. 

Square Footage Added

The first thing to determine is how much additional square footage your home will have. Extra space often increases a home’s appeal and value. This can also change the average buyer demographic.

While your current home might appeal to a young couple looking for a starter home, the extra space from a finished basement could appeal to more established families with kids. 

Homes with small above-ground space often benefit more from a finished basement. This project can increase the number of bedrooms in your home or create recreational areas for guests. 

Purpose of the Space

Next, consider why you are creating the space. The purpose of your finished basement will also affect your buyer demographics. Finishing a basement to create a den, entertaining area, and playroom for kids will have a different impact than adding two bedrooms and bathrooms downstairs. Other uses include establishing a home office and creating complete a guest suite – complete with kitchen – that you can rent out. 

The more niche the space, the more you are likely to limit your buyer pool. For example, a guest bedroom that can be used as a craft room or office is more flexible than turning your whole basement into a home gym. 

Local Market Demand

Consider how common finished basements are in your area. If this amenity is common, you might need to finish the basement to stay competitive in the real estate market. If basements are uncommon, or simply finishing them is rare, then this upgrade might be optional. 

Another factor is the demand for livable space in your area. A finished basement could add more space in a city where square footage is at a premium. Buyers can still find a house in their ideal neighborhood while enjoying enough room to spread out. 

Quality of Finishes

Finishes are the elements you choose to complete the project. They include flooring, lighting options, fixtures, and design elements. Basic finishes may make the space functional but may not significantly impact resale value. For example, if you install a bathroom but it’s cramped and unusable, buyers might not feel excited about the space. If your basement lacks ample lighting, it could feel dingy instead of welcoming. 

Nicer finishes and design elements will cost more, but they may be worth it. It can be hard to strike a balance between upgrading your home with quality finishes and accidentally putting too many high-end elements in your space that you lower your return on investment (ROI). 

Permits and Building Codes

Finally, ensure that the finished basement is up to local building codes and has the necessary permits. Non-compliant spaces may lower home value and will make it more difficult to sell your home. Build permitting into your basement budget to ensure you get the full value from this investment when you sell.

How Much Does It Cost to Finish a Basement?

Finishing a basement can cost anywhere from $15,000 – $75,000 (or more) depending on your goals. The average homeowner pays around $32,000 to complete this project. Your costs will vary depending on your basement size, quality of finishes, and location. Simply put, some areas have a higher cost of living and more expensive project costs than others. 

On the low end, you can furnish a basement with basic finishes for around $10,000–$30,000. This price is also contingent on the types of upgrades you want. If you intend to build a full bathroom or wet bar, you may have to pay for additional plumbing work. Bathrooms also require more finishes, including tile, the shower, the toilet, the vanity, and other basic elements. 

When you start finishing a basement, contact multiple contractors about the project. Get their estimates for the final price of the work – not just the materials. Compare the cost of materials and labor, along with the reputation of each contractor. This way you can get a fair price for your finished basement space. 

The best contractor isn’t always the cheapest. You might choose a contractor that does higher-quality work or communicates better so you have a better construction experience. Seeking out multiple contractors will also help you find the average finishes basement cost for your project so you know what is considered a fair price.

Average ROI of a Finished Basement

Some people start a basement remodel because they want to enjoy the space. Others worry that they need a finished basement to easily sell a home. On average, finishing a basement will yield a 70% to 75% ROI. If you spend $30,000 on your basement project, you can expect to see returns of $22,000 in added home value. 

However, understanding how much value a finished basement provides depends on your region. If you live in an area where a finished basement is expected, you might benefit significantly from starting this project. If these basements are rare or the space is small, they might not have a big impact.   

If you want to remodel your basement because you want to increase your living space and enjoy the area, then tracking ROI might not be as important. However, if you are specifically completing this project to increase property values and hopefully sell your home fast, you may want to explore other options. 

For example, a minor kitchen remodel comes with a 96% ROI while a deck addition can have an 83% ROI. Depending on your house and neighborhood, other investments might pay off more. 

You could also potentially increase the ROI by finishing the basement but leaving the space flexible to buyers. This way the foundational finish is there but the buyer can take on the project of adding a bathroom or kitchen if they so choose.

Does a Finished Basement Add to the Appraised Value?

Appraisers look at basements when calculating home values and will consider whether it is a finished, livable space or whether it is unfinished. An unfinished basement typically isn’t included in the appraised value.

Even if the space is used for storage, it wouldn’t contribute significantly to an appraisal. A finished basement can contribute to the appraised value, especially if it contains valuable assets like a guest bedroom or home theater.

Finishing a basement means you have increased the square footage of living space in your home and increased the number of assets. This is where you can see the ROI of your efforts. Depending on the market and the type of basement finish, you may notice a higher or lower ROI than you expect.   

Appraisers place more value on your above-grade living area (the space above the ground) compared to the below-grade space. Even after finishing your basement, you might not see as significant a jump in your appraised value. This may also depend on your basement layout.

A completely underground basement might have less perceived value than a basement that accesses the driveway (known as a walkout basement) and has windows letting in natural light. The latter option makes the living space feel more natural.   

Every market and home is unique, so it is impossible to determine what an appraiser will say about your space. Even the best basement renovation might not have an exceptional impact on property values.

Potential Drawbacks to Consider

While finishing a basement is a high-demand project for many homeowners, there are a few limitations and drawbacks to keep in mind. Here are a few factors that could sway your decision to keep an unfinished basement or start a renovation project. 

• Cost vs. Value: Some homeowners may not recoup their full investment when it comes time to sell the house. A basement remodel is ideal if you plan to enjoy the space while you live there. Put your desires first. Remodeling the basement just for the home sale might be too expensive and stressful to be worth it. 
• Moisture and Water Damage Risks: Basements are prone to water damage, so proper waterproofing and drainage are essential. Consider whether your basement is at risk of flooding if there are severe storms and have solutions in place in case pipes burst in your home. Water follows the laws of gravity so even small leaks can ruin basement walls or hardwood flooring. 
• Ongoing Maintenance: Finished basements are just like any other part of your home. They require cleaning, repairs, and general upkeep. This is particularly true if you have additional elements like a separate HVAC system or electrical units. Make sure you are prepared to manage this extra square footage.

Finishing your basement can increase the enjoyment you get from your home and help your family grow. However, it also comes with the same maintenance requirements as any other room, plus additional flooding risks.

Is Finishing a Basement Worth It?

You don’t have to be an expert on basements to decide whether finishing yours is worth it. Instead, you can call a professional who understands the market and tours homes in your area every day.

If you are planning on finishing your basement just to get a higher return on investment for the home sale, contact a Realtor. Ask them to look at your home as-is and provide value estimates on what finishing could do.

This can give you an idea as to whether the cost would be worth the reward. You can also request quotes from contractors before this meeting to directly calculate the ROI based on your agent’s estimates. 

Your real estate agent cannot guarantee that their estimate will be the exact selling price of your home. While they can run a comparative market analysis (CMA) and offer recommendations for the listing price, the final sale price could be lower. There are too many moving pieces including the local market, potential buyers, and your specific home to know when your home will sell and for what. Even the best agents can only provide estimates. 

The local real estate market can also change between now and when you decide to sell. The ROI estimate might not be accurate in six months when you actually list the property. Finishing a basement is worth it if you will enjoy it. There are too many risks of starting a basement renovation just for resale value.

Use FastExpert Before Finishing Your Basement

A finished basement can provide a boost in home values while creating assets that are desirable to buyers. You can attract people with additional rooms, bathrooms, and office space – especially if the renovations are new and high quality. However, not every basement remodel adds a noticeable increase to a home’s value. This is why it’s important to consult a professional before you begin. 

Find an experienced real estate agent at FastExpert who can evaluate your home and provide an estimate for its value – before and after the remodel. This can help you understand how the costs will affect your sale price. Your agent might also recommend other upgrades that could have a bigger impact and appeal to buyers. Try FastExpert today and meet with local Realtors. Our service makes it easy to find professionals you can trust.