How To Value Finished Attic Areas
I just received an email from a reader asking how we value attic areas that are more than the typical drop-stair storage areas most of us have. Not to sound obtuse but answer is - it depends. The main considerations are functional utility and market acceptability.
You can think of attics as similar to basements in that respect. If you have a basement that is finished similar to the main level and has adequate access from the interior of the home with an acceptable stairway, it will add more value on the market than one that is partially finished or unfinished. The same principle holds true with an attic.
As a matter of fact, a finished attic area may be worth more per square foot than a similarly finished basement. That’s because basements are considered below grade areas and attics are not. Appraisers are required by FNMA to separate out basements from the above grade square footage and value them differently. Market extractions also show that FNMA is correct on this as basements do generally sell for less per square foot than above grade area.
That being said, the market always determines value. Not the appraiser. We simply put a mirror up to the property and report what the typical purchaser would pay (if that is the appraisal assignment).
To get the most value, this attic area functionally needs to not have the appeal of an attic. In other words, after you have done your renovations it needs to feel like just another level of living space. Or, you shouldn’t be able to tell that you are standing in what once was an attic. Is the stairway narrow? Are the walls and ceiling different from the main level? Is it a large enough room to be functional? Is it heated and cooled? These don’t have to be identical but the closer it is to being similar to the main area, the more value you’ll receive.
Another issue to consider is what is typical for the area. If you live in an area where the typical home is 1 level and you already have a 2 level home you’re probably OK. But if you add a third level (as in finishing your attic) you may have a functional issue with the design of your house because it may not be generally conforming to the neighborhood. And as a general residential rule, the less steps the better.