Want to Add Home Value? Look in the Basement

Consider that building an addition or moving and buying a larger home runs about $150 to $200 a square foot. The cost of finishing a basement is only $40 to $75 a square foot. Basement finish is two to three times more cost effective in adding living space to a home than any other option. According to The Wall Street Journal and a poll of the Appraisal Institute, a basement finish equals a kitchen remodel as the best financial return of all home renovations, but only if the quality matches the rest of the house.

Quality of design and construction is the single biggest factor in determining the value of a basement finish. Your goal: People should walk into the space and say, "This is phenomenal! I can't believe this is a basement!" No matter what your investment -- $30,000 or $100,000 -- if the space looks and feels as comfortable and as nice (or nicer) than the main living space, then you've got a basement that will bring a ton of value -- both in your enjoyment of the space and in the resale value of your home.

So, why does the basement need to be refinished? Basements are inherently dark and a design challenge for the uninitiated. It simply takes more design and better construction to turn a basement into a true extension of your home. A basement that is finished without design and construction rigor becomes little more than a finished storage place. No one enjoys going downstairs into a dark, cut-up space.

From a resale standpoint, a basement finish that is poorly designed and constructed will actually detract from the home's value. A potential buyer, at best, will see the basement as a neutral feature and, at worst, will factor the cost of having to remodel the basement into the home's value.

On the other hand, a basement that truly feels like another level of the home, rather than just a basement, will add value both in terms of quality of life and also as a return on investment at time of resale.

For example, at the Parade of Homes the biggest line in the featured homes always leads to the basement. When a basement is well done, it commands attention. The basement is the adult toy room -- housing home theaters, wet bars, exercise rooms and wine cellars. It's the one spot in the house where the architectural design is all about having fun. With a great finish, not only does a basement finish nearly double the size of the house, but also it often becomes the most popular space in the house.

How can you maximize the value of a basement finish?

A great finished basement demands even better design and construction than your upstairs living space. Matching trim, paint color, carpet, fixtures and finishes with the upstairs does not constitute a fantastic finished basement. Investing in professional design and quality construction increases the likelihood that you will maximize your home's value.

Compensate for the inherent problems of a basement. Basements typically have lower ceilings, random ductwork, structural posts, pipes and valves, all of which demand great design to hide or blend in with the space. Turn these design challenges into design features, and you are well on your way to creating a fantastic finished basement which will add a ton of value to your life and to your home's resale value.

How much to spend

As a rule, plan on investing 12 percent to 25 percent of the cost of your home on a basement finish. If you are hiring a general contractor and spending less than this, take a second look at what you are buying. Special design features might cost a little more but can make the difference in creating a phenomenal space. Special interest items like a dark room or special sporting areas (e.g., rock climbing walls) typically do not appeal to a broad enough range of people to recoup the investment at resale.

Try to remain in line with the pricing in your neighborhood. If you already own the most expensive home on the block, it's going to be tough to get your full investment out of a basement finish.

Is there good value in finishing a basement? Put simply: absolutely. When both financial investment and lifestyle enrichment are properly matched with great design and construction, basement finishes return solid value.