Calculating the Square Footage of a home with appraisal standards: How does an Appraiser Buyer, Seller, Realtor or Real Estate Professional calculate Gross Livable Area (GLA), often referred to as livable square footage, and why do some lenders allow the inclusion of certain square footage in the appraisal report of a home whereas others do not? These are common questions asked throughout the industry as a whole, and the information provided below may offer some guidance and alleviate some confusion.
The American National Standards Institute (ANSI) relegates the appraisal standards defining what constitutes living space square footage for Fannie Mae transactions. Fannie Mae requires the use of ANSI standards when calculating the square footage of a home for single family homes, manufactured homes, town houses, etc. It is not required for desktop appraisals, apartment style properties or multi-family properties. These figures often differ from the calculations often utilized by Buyers, Sellers, County Auditors and Accessors as well as real estate professionals directly. While other government lending institutions such as Freddie Mac, FHA and the VA have stated they will accept the ANSI standard, they are not required to use it.
Calculating the Square Footage of a home with appraisal standards specifically pertaining to Cape Cod style homes was discussed in the National Association of Realtors (NAR) Magazine in June of 2022, as Cape Cod style homes have finished areas in the upper level that may offer a ceiling height of less than 7 feet. ANSI has stated this area, although finished and livable, can’t be counted in the total finished square footage of the home, therefore a Fannie Mae appraisal will relegate that finished square footage to another section of the appraisal report in which negative and positive adjustments are made rather than granting it full GLA value. Other government agencies (Freddie Mac, FHA and the VA, etc.) may include said square footage as GLA livable space. While ANSI’s intent is to provide uniformity across all marketplaces, this policy not only causes confusion-it may adversely affect the appraised value of the home.
Another concern is the calculation of square footage of an underground or BERM (Bermed Earth-Sheltered Home) home. A bermed house may be built above grade or partially below grade, with earth covering one or more walls. An “elevational” bermed design exposes one elevation or face of the house and covers the other sides—and sometimes the roof—with earth to protect and insulate the house. If one were to take ANSI’s guidance at face value said homes would have zero GLA square footage, however they have created a process with which to facilitate exceptions to their standard criteria.
Below are some of the key points of the ANSI standard when Calculating the Square Footage of a home with appraisal standards:
• Measurements are calculated to the nearest inch whereas the final square footage calculations are reported to the nearest whole square foot.
• Staircases are included in the square footage of the floor from which they descend.
• Finished living area square footage, whether partially (such as a bi-level, multi-level or split) and areas fully below grade are all delineated as basement area. This figure is not calculated with equal value as above grade finished square footage and is referenced in a separate area on the appraisal report itself.
• Open areas to the floor below such as a 2-story foyer are often referred to as a “negative area” and are not included in the finished square footage. For example – if the 2nd floor area had been completely finished, eliminating the open foyer 2 story great room concept – the additional finished square footage calculation would reflect the additional GLA living space where as the open area does not.
• All finished areas must have a 7’ ceiling or higher. 50% of the finished square footage of the room with a sloped ceiling must have 7’ or higher ceiling. Any area with less than a 5’ ceiling can’t be included at all. If any area does not meet ANSI’s criteria, it must be delineated in a separate part of the report with a market adjustment.
• If the appraiser identifies any addition(s) that was not completed with a required permit, the appraiser will note the quality and appearance of the work which may impact the market value of the home.
Extensive information & brochures are available via this link on the Appraisal Foundation Organization’s website.
Final thought: Appraisers must consider numerous other factors when facilitating an appraisal. It may be in a Seller’s best interest to retain the services of a licensed real estate appraiser familiar with the area prior to placing a home on market so they are prepared when it is time to negotiate a contract. While the Buyer will not be able to use said appraisal to satisfy their lender, the Seller will benefit from the knowledge of fair market value when negotiating appraisal gap language when negotiating offers.
When the time comes to sell your home it may be prudent to consider utilizing an Ohio Broker Direct Flat Fee MLS Listing rather than going the traditional route.
Selling real estate on your own without the assistance of a traditional service Real Estate Brokerage will require both commitment and due diligence for which you may be rewarded by saving thousands of dollars in commissions. Maximizing marketing exposure is key. We have SOLD well over a BILLION DOLLARS in Real Estate & Saved Sellers Millions of Dollars in Real Estate commissions. Please contact our team to learn how the For Sale By Owner Flat Fee MLS Listing Options at Ohio Broker Direct will enhance your marketing exposure to ensure a more expeditious sale, yielding a higher price with better terms that suit your specific needs. Reach out to us directly, visit our blog page or sign up for our newsletter to receive the latest information to ensure you have the knowledge to maximize your profit.
Joan Elflein, Broker / Ohio Broker Direct Ohio Broker Direct & its Brokers or Associates assumes no responsibility or liability for any errors or omissions in this blog, we advise all participants engaged in the buying or selling of Real Estate to enlist the services of a Real Estate Attorney.