For this post, I thought I should post on a rule that many homeowners find it difficult to understand, or do not simply know about.

First I thought I would quickly give a brief background on comparables, so all home owners know exactly what I am referring to.

Comparables, or “comps” for short, are what a Realtor will use to value a piece of real estate. They will look at a few items in order to get an accurate reading of how to value your home, including the following:

• Houses for sale in your area
• Neighborhood
• Proximity to schools.
• Number of Bedrooms, Bathrooms

Square footage of your home (your home size) is a big determinate because all the factors above determine the rough price per square foot you can charge for your home. The size of your home, may not be what you think it is, the Real Estate Board has rules that define what counts as “residential or livable square footage.” There are certain sections of your house that do not count as part of your residential square footage.

Below Grade Definition:
There is a term in Real Estate that is frequently mentioned when valuing a home called Below Grade.

Below Grade refers to a space or portion in your house that falls below the surface of the ground. It usually refers to the basement in the home.

How Does This Affect Me As A Home Owner?

Anything below grade is not considered part of the “livable/residential square footage” of the house. To put this in simplest form, let’s say your house is 1500 square feet including the basement, and you have two bedrooms upstairs and you want to make two downstairs in your basement.

Selling your home the Realtor, can only count bedroom and bathrooms that are above grade – The basement does not count in terms of square footage or bedroom/ bathroom count. You essentially only have 1250 square feet (250 square foot is your basement) and still only two bedrooms.

If your neighborhood and similar properties sell at $300.00 per square foot, your home without the basement is 1250 square feet, you are looking at a listing price of approximately $375,000. ($300.00 multiplied by 1250sqf.) Three bedrooms might be selling at $400.00 per square foot, however the rules unfortunately do not allow the Realtor to count this as a bedroom and or bathroom.

This means that your bedroom and bathroom downstairs in the basement do not make your property a three bed, three bathroom, house but rather make the bedroom and bathroom in the basement as a “nice” feature of the property.

Rules such as these will affect the price that investors, and buyers will want to pay for your home, and must be taken into consideration when listing your property.

In conclusion, below grade refers to areas of your house that are below the surface of your property, anything below this point does not count as residential square footage.

The dilemma of Real Estate? Where does the financial mindset of price per square foot end, and the emotional livability of one’s home begin?