Do Finished Basements Add Value to Houses?

Location

• With or without a finished basement, the old real estate saw about the importance of location remains true. If you live in a very nice neighborhood and your house is equal to those surrounding you, it's probably valuable and salable. If your house is the nicest one in the neighborhood, you're unlikely to recoup the cost of renovating your basement, because you still haven't renovated the neighborhood. If everything about your house is stellar except for the basement, that's a situation where finishing it makes economic sense.

Quality

• There are good basement renovations and there are bad ones. If you do a bad one or, even worse, pay someone else to do a bad one, you're probably spending money to lose money. Buyers don't just want a finished basement, they want a basement that's been finished well, by a skilled craftsman, with quality materials. Buyers who are confronted with a badly renovated basement will see it as a liability, not a benefit. Basements that are renovated on the cheap solely to turn a profit usually stick out like sore thumbs and scare buyers away.

Cost

• In most situations, you can increase the selling price of your house with a finished basement. The problem is, you won't be finishing it for free. The only number that matters is the increase in your selling price minus the cost of finishing the basement. If this is a negative number, it is not to your advantage to finish the basement.

Saleability

• Increasing the market value of a home isn't the same thing as increasing its appeal to buyers. Newly renovated basements, kitchens and bathrooms don't increase market price as much as many people want to believe, but they do make a house more attractive and can greatly reduce the amount of time it will sit on the market. A finished basement might make buyers more willing to buy your house and yet not make them willing to pay more for it.

Being Realistic

• Take a good look at your basement when you're thinking about finishing it. If it has low headroom, a furnace smack in the middle, water problems and no windows, it probably isn't worth it; the renovation would certainly cost more than it would add to the value of the house. A basement needs some potential to begin with to make it worth the expense and effort.