Yes, mostly through use, and partly at resale. The 2025 Cost vs. Value Report puts a basement remodel at 71% of cost recouped nationally, and NAR's 2025 Remodeling Impact Report puts a basement conversion at 71% recovered with a homeowner Joy Score of 8.8 out of 10.
Appraisers do not count below-grade space as gross living area; it is valued on its own line. If you will stay five years or more, the room you use is the real payoff; if you sell within a year or two, expect to recover only part of the cost.
On this page
- The short answer: about 71% back at resale, plus the years you use it
- What the two major studies say, side by side
- What the 71% actually measures, and what it does not
- How appraisers count basement square footage
- Why a listing says one number and the appraisal says another
- Will finishing the basement raise my property taxes?
- What part of a finished basement holds value best
- The cost side of the equation
- How to decide: staying 5+ years vs. selling soon
- How this plays out in a typical Twin Cities basement
- Questions people ask
The short answer: about 71% back at resale, plus the years you use it
Two national studies measured this in 2025, and they landed on the same number. The 2025 Cost vs. Value Report from the Journal of Light Construction puts a basement remodel at 71% cost recouped nationally. The 2025 Remodeling Impact Report from the National Association of REALTORS® and NARI puts a basement conversion to living area at 71% cost recovered, with a Joy Score of 8.8 out of 10 from homeowners who finished one.
Read that plainly: on resale, a finished basement is not free money. Roughly seven of every ten dollars you put in comes back in the sale price, by these estimates. The other three buy you the room itself, for as many years as you live with it. Whether that is a good trade depends almost entirely on how long you stay, which is the question I spend most of this article on.
I also want to be clear about what these numbers are not. They are national estimates built from surveys of real estate agents. Neither study publishes a Minneapolis or Twin Cities figure that I could verify, so I am not going to invent one. What I can do is show you exactly how each number was built, how an appraiser in Minnesota actually treats basement space, and how to make the call for your own house.
What the two major studies say, side by side
These are the two sources real estate agents, lenders and remodelers quote most. They measure similar things in different ways, so it helps to see them next to each other.
| Cost vs. Value 2025 (JLC) | Remodeling Impact Report 2025 (NAR + NARI) | |
|---|---|---|
| Project measured | Basement Remodel | Basement conversion to living area |
| Share of cost recouped at resale | 71% (national average) | 71% (national estimate) |
| Homeowner satisfaction | Not measured | Joy Score 8.8 of 10 |
| Defined scope | 20 ft x 30 ft entertaining area, wet bar, 5 ft x 8 ft full bath, insulated exterior walls, laminate floor, 15 recessed lights | Not itemized; costs assume a 2,300 sq ft post-1978 house, standard materials, no hidden problems |
| Where costs come from | Verisk XactRemodel building cost data, indexed to BLS and BEA price data | Survey of NARI member remodelers (177 responses, summer 2024) |
| Where resale value comes from | Zonda online survey of 6,000+ REALTORS, given project descriptions, photos, costs and local median home prices | Survey of NAR members (4,005 responses, summer 2024) |
| Local figure for the Twin Cities | Regional and city breakdowns exist in the report; I could not verify a Minneapolis or West North Central figure, so none is given here | National only |
Sources: Cost vs. Value 2025, Cost vs. Value project descriptions, Cost vs. Value 2025 methodology, NAR 2025 Remodeling Impact Report. For context, the same NAR report lists a complete kitchen renovation at 60% recovered and a bathroom renovation at 50%.
Two things stand out. First, the 71% agreement is a coincidence of method, not proof of a law of nature: one study prices a fixed, itemized project with estimating software, the other asks remodelers what a typical job costs. Second, by the NAR report's own figures, a basement conversion recovers more of its cost than a complete kitchen renovation (60%) or a bathroom renovation (50%), and it beats the attic conversion (67%) too. Among large interior projects, the basement holds up well.
Why the NAR Joy Score matters more than people think
The Joy Score comes from a HouseLogic survey of homeowners who did the project: it combines the share who were happy and the share who were satisfied, then divides by 10 (NAR 2025 report). An 8.8 means the overwhelming majority of people who finished a basement were glad they did. That is the half of the payoff the resale percentage cannot see.
What the 71% actually measures, and what it does not
The Cost vs. Value number is tied to one specific project. The report's project description for the basement remodel is a 20 by 30 foot entertaining area with a wet bar, a 5 by 8 foot full bathroom with a fiberglass shower unit, a finished partition around the mechanical area, insulated and drywalled exterior walls, five interior doors, 15 recessed lights plus three surface fixtures, and snap-together laminate flooring. The bar is 10 linear feet of oak cabinets with a laminate top, a bar sink and an under-counter fridge.
That matters for you in two ways:
- A finish without a bathroom is a different project. If you finish the space but skip the bath, you are not buying what the 71% measured. The number may go up or down for you; nobody has published a figure for that exact scope, so I won't pretend to know.
- Resale value is an agent's estimate, not a sale. Per the methodology, Zonda asked REALTORS, "What value does each of the 28 remodeling projects add to the sale price of a home?" These are informed opinions from people who sell houses, not results pulled from closed sales of finished versus unfinished homes.
The report's own notes on what the numbers mean are frank about the limits: small changes in size or scope swing price, the tiers cannot capture every local market, and resale value depends on the home's condition, nearby sales and local price trends. Its advice is to get local estimates from remodelers and talk to a local real estate professional. I agree with that, and I would add one more step: ask the agent how finished basements are showing up in recent sales in your neighborhood specifically.
How appraisers count basement square footage
This is the part most homeowners get wrong, and it changes how you should think about value. A finished basement in a Twin Cities suburb almost never shows up as "square footage" in the way your main floor does.
Below-grade space is not gross living area
Fannie Mae's Selling Guide (B4-1.3-05) says Fannie Mae considers a level to be below grade if any portion of it is below grade, and that finish quality and window area do not change this. Appraisers report below-grade areas separately and adjust for them on the "Basement & Finished Rooms Below-Grade" line of the sales comparison grid. Below-grade rooms are left out of the above-grade room count. The guide is explicit that a walk-out level that is partly below grade is still reported as below-grade space, not above-grade square footage.
Measurement follows the ANSI Z765-2021 standard, which Fannie Mae has required for appraisals with effective dates on or after April 1, 2022 (Fannie Mae ANSI fact sheet). Under it, "basement is any space that is partially or completely below grade," and a level counts as below grade "if any portion of its walls is not entirely at or above ground level." Appraisal educator McKissock sums it up: "A finished basement that is wholly or partially below grade is not part of GLA" (McKissock).
It still adds value, on its own line
Not being in GLA does not mean the basement is worthless to the appraiser. Fannie Mae's guide notes that below-grade rooms may add substantially to value, especially with high-quality finishes (Selling Guide B4-1.3-05). The appraiser compares your finished lower level to finished and unfinished lower levels in comparable sales and makes a dollar adjustment on that separate line. So the value is real, it just gets counted with a different ruler than your kitchen.
Ceiling height decides what counts as finished
ANSI Z765 sets a floor for what can be reported as finished area: finished areas must have a ceiling height of at least 7 feet, and no part of a finished area under 5 feet can be included (Fannie Mae ANSI fact sheet). Space that misses the standard gets reported on a separate line with a market adjustment if warranted. In a basement with a low duct trunk or beam, how you frame soffits and where you put rooms affects what an appraiser can call finished.
Appraisal forms are changing. McKissock reports that the updated Uniform Appraisal Dataset (UAD 3.6), mandatory November 2, 2026, replaces the GLA label with "Finished Above-Grade Area" (McKissock). Basement space stays outside that above-grade figure.
Why a listing says one number and the appraisal says another
Listings often advertise "total finished square feet," basement included. The appraisal reports above-grade area and below-grade area as two separate figures. Neither is lying; they are answering different questions. When you compare your house to a neighbor's sale, compare like with like: above-grade to above-grade, and finished lower level to finished lower level. If you divide a sale price by a total that includes the basement, you will undervalue the main floors and overvalue the lower level.
Will finishing the basement raise my property taxes?
Expect it to. Minnesota values property as of January 2 each year, and that assessment sets the base for the following year's taxes. Anoka County's assessor puts it directly: "improvements that increase the market value of a property will increase the assessor's estimated market value," and lists basement finish among the characteristics the assessor considers, alongside size, age and quality (Anoka County assessor FAQ). Anoka County also notes that individual minor repairs do not raise your value, but extensive remodeling does.
How much your tax bill moves depends on your city's and school district's levies and how the rest of the market moved that year, so there is no honest single percentage to quote. The practical step: call your county assessor's office (Dakota, Scott, Hennepin, Carver, Anoka, Washington or Ramsey) and ask how they review finished basements and when the change would show up on your value notice.
Check with your county: assessment practices and timing vary by county. The Anoka County guidance above is an example, not a rule for every county.
What part of a finished basement holds value best
I am careful here, because this is where a lot of online advice turns into guesswork. The sourced points are narrow, and I will stick to them:
- Finish quality matters to appraisers. Fannie Mae's guide specifically notes below-grade rooms may add substantially to value with high-quality finishes (B4-1.3-05).
- Ceiling height and real finish decide what counts. Areas that fail the ANSI 7-foot rule are reported separately (Fannie Mae ANSI fact sheet). A finish that keeps most of the floor at full height reads as more finished space on paper.
- The 71% figure includes a bathroom and a wet bar. That is the scope agents were asked to value (project descriptions). If your plan matches it, the national number describes your project more closely.
- A bedroom has to be a legal bedroom. A room you plan to market as a bedroom needs code-compliant emergency escape and rescue openings; see the permits and egress guide and egress window guide before you count on that room.
For how to spend inside your budget, line by line, see where to spend and where to save.
The cost side of the equation
A recoup percentage only means something once you know what you are spending. I keep cost figures in two places so they stay current: what finishing a basement costs in the Twin Cities and what three budget levels actually buy. Use those numbers with the percentages here: your likely resale bump is roughly the national recoup share times your real project cost, adjusted for your neighborhood.
Two cost choices change the payoff more than any finish choice. First, scope: adding a bathroom where there is no rough-in can mean breaking concrete or adding an ejector pump, which raises cost without necessarily raising value proportionally. Second, fixing the basement before you finish it. Moisture, radon and sump problems do not go away behind drywall, and a buyer's inspector will find them.
How to decide: staying 5+ years vs. selling soon
The resale percentage treats your basement as an investment you cash out. For most families it is a room you use, and the value of using it compounds with time.
| Your situation | How the math looks | What I would do |
|---|---|---|
| Selling within 1 to 2 years | You recover roughly 71% of cost by national estimates, and get little use from it | Finish only if comparable homes nearby all have finished lower levels; otherwise clean, dry and paint the space and let the buyer imagine it |
| Staying 3 to 5 years | Same resale share, plus a few years of a usable family room, guest room or office | Finish if you need the space; keep the scope close to what neighbors' homes have |
| Staying 5+ years | The resale share is a bonus; the real return is years of extra living area | Finish it for how you live, and spend where you touch it every day |
| Growing family or multigenerational need | The alternative is moving or adding on | Compare finishing against the cost of moving; include a legal egress bedroom and a bath |
A quick test I use: list what the finished space would replace. A home office you would otherwise rent, a guest room that saves a hotel, a playroom that takes toys out of the living room. If you can name two or three of those, the 29% you do not get back at resale is buying something real.
And one caution that cuts the other way. Over-building for the neighborhood is the classic way to lower your recoup. If the comparable homes on your street sell with simple finished lower levels, an elaborate bar and theater will be worth more to you than to the next buyer. That is fine if you plan to stay, and a poor bet if you plan to sell.
How this plays out in a typical Twin Cities basement
Take the house I design for most often: a Lakeville, Shakopee or Maple Grove two-story or split built between 1985 and 2015, with poured walls, about 8-foot ceilings, a main duct trunk and a beam, a sump in one corner and the furnace and water heater in another. Here is how the value pieces line up.
- The appraiser sees it as below grade. Even with a walk-out or big egress windows, any portion of the level below grade makes the whole level below grade under Fannie Mae and ANSI. Your finished lower level gets its own line on the appraisal, separate from above-grade square footage.
- Your 8-foot ceilings are an asset. The ANSI rule for finished area is 7 feet. Plan soffits around the trunk and beam so the main rooms keep full height, and keep low areas to hallways and the mechanical edge.
- Your project is close to the Cost vs. Value scope. A family room, a bar and a full bath in 800 to 1,300 square feet is in the same family as the 20 by 30 foot entertaining area, wet bar and bath that the 71% measures.
- Your taxes will likely rise. Basement finish is one of the characteristics Minnesota assessors look at; check your county's timing.
- Your cost is the variable. Look at what finishing a basement costs in the Twin Cities and what three budget levels actually buy, then apply the percentage.
If you are staying five years or more, I think the case for finishing is strong. If you are listing next spring, I would put the money into making the unfinished space clean, dry and bright, and let the price reflect the potential.
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Design my basement with EmmaQuestions people ask
What is the ROI of finishing a basement?
National estimates for 2025 put it at about 71% of cost recouped at resale: the Cost vs. Value 2025 report says 71% for a basement remodel, and NAR's 2025 Remodeling Impact Report says 71% for a basement conversion to living area. These are agent estimates, not closed-sale results, and your neighborhood can differ.
Does a finished basement count as square footage in Minnesota?
Not as gross living area on a standard appraisal. Fannie Mae treats any level partly below grade as below grade, and appraisers report it separately on the "Basement & Finished Rooms Below-Grade" line (Fannie Mae Selling Guide). Listings may still advertise total finished square feet including the basement.
Does a walk-out basement count as above-grade living area?
No. Fannie Mae's Selling Guide says a walk-out level that is partially below grade is not included in above-grade square footage; it is reported as below-grade space and adjusted separately (B4-1.3-05).
Will finishing my basement raise my property taxes?
Likely, yes. Minnesota values property as of January 2 each year, and assessors list basement finish among the features they consider; improvements that raise market value raise the estimated market value (Anoka County assessor). Ask your county assessor how and when they review finished basements.
Is finishing a basement worth it if I'm selling in a year?
Usually only if comparable homes nearby all have finished lower levels. National estimates say you recover about 71% of the cost, so a short stay means you pay the rest for little use. Cleaning, drying and brightening the unfinished space is often the better move.
What ceiling height does a basement need to count as finished?
Under ANSI Z765, which Fannie Mae requires appraisers to follow, finished areas need a ceiling height of at least 7 feet, and nothing under 5 feet can be included (Fannie Mae ANSI fact sheet). Space that misses the standard is reported separately.
Is a basement a better investment than a kitchen remodel?
By NAR's 2025 figures, a basement conversion recovers 71% of cost versus 60% for a complete kitchen renovation and 50% for a bathroom renovation (NAR 2025 report). The kitchen still scores higher on homeowner joy, 9.7 versus 8.8.
Sources (10)
- Cost vs. Value Report 2025, Journal of Light Construction — Basement Remodel: 71% cost recouped, national average; list of 28 projects
- Cost vs. Value: Project Descriptions — Scope of the Basement Remodel project (20x30 area, wet bar, 5x8 bath, finishes)
- Cost vs. Value 2025: Methodology — Costs from Verisk XactRemodel; resale values from Zonda survey of 6,000+ REALTORS
- Cost vs. Value 2025: What the Numbers Mean — Caveats on local variation and resale value
- 2025 Remodeling Impact Report, NAR Research Group and NARI — Basement conversion: 71% cost recovered, Joy Score 8.8; comparison projects; survey methods
- NAR: 12 remodeling projects that offer the best value at resale (April 9, 2025) — Confirms basement conversion to living area at 71% in the 2025 report
- Fannie Mae Selling Guide B4-1.3-05, Improvements Section of the Appraisal Report — Below-grade definition, separate reporting line, walk-out treatment, ANSI Z765-2021 requirement, value with high-quality finishes
- Fannie Mae ANSI Z765 Fact Sheet (updated 3/31/22) — Basement definition, April 1, 2022 effective date, 7 ft and 5 ft ceiling rules, separate-line reporting
- McKissock Learning: Understanding Gross Living Area — Finished below-grade basements excluded from GLA; UAD 3.6 change effective November 2, 2026
- Anoka County, MN: Property assessment FAQ — January 2 assessment date; improvements raise estimated market value; basement finish considered
More in Value & cost-benefit
- What each upgrade adds to the price of a finished basement
- Value buys: basement products that look like more than they cost
Keep reading
- What does $50K, $65K or $80K buy in a Twin Cities basement?
- How much does it cost to finish a basement in the Twin Cities? (2026)
- Where to spend and where to save when you finish a basement
- What does a basement bedroom need to be legal in Minnesota?
- How does finishing a basement actually go, and what should you fix before the walls go up?