Finishing a basement is one of the most cost-effective ways to increase livable square footage in a home without the cost or disruption of a full addition. But as a contractor, how should you guide clients through the process, especially when code compliance and potential ROI all come into play?

We talked with builders from across the country as well as a building code expert to break down what finishing a basement really means—for your business and for your clients.

The Best Bang for the Square Foot

For homeowners, finishing a basement is often a no-brainer. “The savings are there because it’s already built,” says Jon Beer, a design-build contractor in Hudson Valley, New York. “In most cases, it’s the cheapest way to expand the home’s footprint.”

In Pennsylvania’s Leigh Valley region, Dave Shankweiler of Curtis E. Schneck Inc. agrees. “It’s inexpensive square footage. And with the right planning during the build, it’s easy to finish later.”

Some builders routinely prep basements for future finish even when it’s not in the current scope. Think 9- or 10-foot walls, smart mechanical layouts, roughed-in plumbing, and proper waterproofing.

“We make an effort to build in a way that is conducive to finishing it off later,” says Matthew Cole, president and CEO of Cape Associates in Massachusetts. “We pay close attention to waterproofing and duct placement so ceiling heights stay comfortable.”

Know What They’ll Use It For

Clients may not be thinking resale, but you should be. Whether it’s a future guest suite, rec room, or workspace, get clarity on a basement’s intended use. Finished basements today often serve as media or rec rooms, guest bedrooms and in-law suites, home gyms or hobby areas, secondary laundry or bathroom zones.

Walk-out basements offer even more flexibility, including short-term rental potential or multigenerational living. But no matter the use, comfort matters. Builders say LED lighting, ductless mini-splits, and luxury vinyl plank flooring are frequent go-tos.

Including a Bedroom? Add an EERO

Don’t talk about “egress windows”—talk about emergency escape and rescue openings (EEROs). This is crucial if a finished basement has a bedroom, because the code requires an EERO. People are most vulnerable when they’re asleep—their response to smoke, fire, or carbon monoxide is delayed, and they may not reach the main exit in time. A properly sized and placed EERO can mean the difference between life and death.

“EEROs are about rescue and survival. You’re not just helping someone get out—you’re giving firefighters a way in,” says Glenn Mathewson, a veteran inspector and founder of BuildingCodeCollege.com.

Mathewson has seen some contractors try to skirt this requirement by labeling a bedroom as a “sewing room” or “bonus room.” Doing this could sink any potential resale value.

“If your plan reviewer doesn’t catch it, your inspector will,” Mathewson says. “Or worse—someone will later, when you’re trying to sell the house.”

If it looks like a bedroom, treat it like a bedroom—and include the required emergency exit.

“Appraisers may not count basement square footage if it wasn’t inspected and permitted,” Shankweiler said.

Beyond resale, permits ensure safer work—and protect both you and your client.

What About Existing Basements?

Newer codes (2018 IRC and forward) include limited exceptions that allow for smaller rescue openings in retrofits—but they’re not for new construction or full basement overhauls. “These are allowances meant to bring dangerous conditions closer to compliance, not to dodge requirements,” Mathewson says.

Contractors working in older homes—or areas without strict code enforcement—should educate themselves on national standards and not rely solely on outdated local codes, Mathewson says.

The Takeaways:

Finished basements are a high-ROI opportunity—if you do them right. From prepping utility layouts to advising on code-compliant escape routes, your expertise can make or break the project’s long-term value.Prep for future finish, even if it's not in the current scope.Talk to clients early about their intended use.Prioritize life safety and code compliance—don’t play games with labels.Permits protect everyone. Make sure the work is legal.Know the code, and make it part of your professional baseline.
Done correctly, a finished basement doesn’t just add space—it builds trust, adds value, and sets you apart as a contractor who knows how to think ahead.