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Beware! Upside Down Builders

October 27, 2015 by Bostedo Appraisal Services - the Pittsburgh Appraisers

 Beware! Upside Down Builders

upside down builders

I’m sure many of us have seen them and frankly, probably never gave it a second thought, the homes that were built upside down.

Well, upside down I guess is only a matter of opinion. You can call them just about anything, even contemporary will work. However, there is one thing you can’t get away from, why is there only 1 bedroom on the 1st floor and all the rest of the bedrooms are downstairs?

Thankfully there are not too many around, but I have seen my share. Don’t get me wrong, many enjoy this type of floor plan. Many have bought these homes from builders in newly developed plans and some have even designed them with architects. The reasoning as to why people may want to have this type of home is not what this blog is about. It is the unintended ramifications that can arise by purchasing or building this type of home is the real story.

I have posted a number of times about how appraisers calculate square feet in residential homes. We use ANSI which was developed by the National Association of Home Builders along with the International Building Code when it comes to determining the actual square feet of any residential dwelling. This same method is also used and required by many lenders. In fact, with over 30 years in the real estate field on all sides of the table, I have never ‘NOT’ seen this standard applied.

This leads us to the problem that is created by the upside down builders. I have personally seen builders build these types of homes and then turn around and sell them to the general public, through their own mortgage company mind you. As I originally said, it is a personal choice if you want a home like this, but, be forewarned, a number of years down the road when you want to refinance or even sell, this is when you may find yourself in a situation that you did not expect.

Because these types of homes are built with only 1 bedroom above grade on the 1st floor and all the rest of the bedrooms & baths below grade, your rooms downstairs do not get included in GLA or Gross Living Space. That’s right; you now have a 1 bedroom that is ½ the size you originally thought. This creates a problem now for the homeowner. If the homeowner decides to refinance their home, the appraiser will appraise the property as a 1 bedroom and only include the square feet that is above grade. Likewise, the Bank will only consider the above grade living area.

We now have a property that will not meet lender guidelines because there are no 1 bedroom comparables that are remotely similar to the subject. Many times at this point the lender will ask the appraiser to please find a similar sale whereas the appraiser has to reply there are none. This generally means that the lender will now deem the property as ‘Unique’ and not common for the area where at this point they will turn down the loan for either the homeowner if they are refinancing or the buyer if they are trying to purchase the home on a resale. This is not to say this is a guarantee this will happen, it is just a warning that to try and get a property like this to close, there are many, many more hoops to jump through and there also very well could be a loss of value along the way.

So I do see this from time to time and in fact twice this year. This is why I wanted to pass along some of this inside information to keep in the back of your mind. If somewhere down the line you may have family or friends that may be looking at this type of a home, you may want to let them know of some of the future pitfalls they may incur. Additionally, if you happen to be in the Real Estate industry you may want to keep this in mind to inform any of your clients. They will thank you and you will only enhance your standing as ‘The Knowledgeable Professional’.

 

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