Some blast new rule on square footage; others say it's fairer
By John Rebchook, Rocky Mountain News November 2, 2006
Residential real estate broker Sonja Leonard Leonard believes that a year-old rule that requires basements to be included in a home's square footage is contributing to the Denver area's record number of foreclosures and growing mortgage fraud.
She argues that, under the new rule, buyers think they are getting a much bigger house than they really are.
Other brokers, however, believe that the Metrolist change, which went into effect Jan. 1, reflects how other listing services calculate square footage and provides a better picture of suburban homes with sometimes luxurious walk-out basements.
But Leonard Leonard, who has been selling and investing in real estate for the past 27 years, counters that most houses in the central city neighborhoods her company serves don't have those big walk-out basements.
One home on Williams Street, for example, was recently listed as 3,200 square feet, but half the space was the basement.
"What is so frustrating about this is that it leads us right into the path of fraud and sleazy appraisers," she said. "People are thinking they are buying homes for $150 per square foot, when it is really selling for double that. I've seen homes magically blossom from 2,000-square-foot homes to 4,000-square-foot homes because the basement is included."
She argues the new rule allows brokers to list a "coal room" in the basement as if it were equivalent to a finished basement. A more precise definition of "finished" space is needed, she said.
Ed Hardey, a RE/MAX 2000 broker and a member of the Metrolist board, disagrees.
"Part of our challenge is that we have 18,000 brokers who use our service, and we can't please everyone," he said "A large number of brokers wanted us to change the rule to reflect what is happening in a lot of homes, especially outside of the older neighborhoods in the city. Some basement walk-out space is nicer than the rest of the living space in the house."
Hardey said there is no evidence that the rule is contributing to foreclosures or mortgage fraud, or is affecting the sale price of a home. He argues that no one buys a home without touring it first.
He said he's spoken to several hundred brokers about the change and that the vast majority have no problem with it.
Hardey said the rule only affects 4 percent of the homes in the central Denver area but a much higher percentage in the suburbs.
Chris Mygatt, president of Coldwell Banker in Colorado, said brokers want consistency.
"My opinion is that what is important is that all homes in the marketplace are compared equally," Mygatt said. "And I would say that 20 years ago, basements typically weren't important living areas, but that has changed a lot in recent years."
Basement rule at a glance
Square footage of the above-grade living space shall be specified on the property data form in the square feet field. Basement square footage is never allowed in the square feet field, but the finished portion of a basement may be included in the finished square feet field. The form has three mandatory square feet fields:
• Square feet: Includes the square feet of the main, upper and lower levels. When lower level is included, the type of lower level must be identified.
• Finished square feet total: Includes all finished main, upper, lower and basement square footage.
• Total square feet: Includes main, upper, lower and basement, regardless of whether the area is finished.
For more info on basements, go to www.ColoradoDreamHomes.net
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