As of April 1st Appraisers are measuring homes a new way!

ANSI Regulations dictate how we measure; Fannie & Freddie require it.

As of April 1st, 2022 Appraisers have been calculating square footage in a new way. 3 key changes so read on!

Bottom line, this is actually a good thing as there will be consistency in how Gross Living Area and overall square footage is calculated. Many Appraisers including yours truly have been measuring homes this way for years with one little exception and that is.....

How we calculate the area in a 2 story foyer. 

(ANSI: Which stands for American National Standards Institute is a private organization that administers and coordinates the U.S. voluntary standards and conformity assessment system to increases efficiency).

ANSI states that the stairs coming down from the upper level must be included in the total Gross Living Area (GLA). That area fully above grade/ground. The stairs you see in the photo will be included in the 2nd floor sketch. (The entire foyer is already included in the first floor, but not the 2nd floor per ANSI)

See how there is a space between the first step of the stair case and the front door? This is 2 story space (see photo above) and is NOT included in the square footage.

The back wall of the 2 story foyer (where the photos are hung in the 1st photo above) to the front door and across the front of the entire 2 story foyer are also NOT included in the 2nd floor sketch. 

In many cases the Appraisers would cut the entire 2 story foyer out of the 2nd floor and NOT include the stairs. So this means the property being appraised will have just a bit more square footage, which has a direct impact on value. Other Appraisers would include the ENTIRE foyer into the 2nd floor area, thus giving the property more square footage than it should have. This creates over valuation. 

The basement situation is very clear with ANSI. If any of the lower basement level is below grade (ground), which most are in the front of the home, the entire basement area must be separated from the upper, fully above grade levels. No exceptions. Sometimes Appraisers have included the terrace level into the gross living area if that area was finished in the same manner as the above grade levels or if all the bedrooms or baths (rare but it happens) are in the basement level. This can NO LONGER be done. Basements must be kept as basement space in the sketch and NOT included in the GLA. (gross living area). It is calculated as basement space and given value as the market dictates. Remember all comparable sales will be treated the same way with regard to basements, bed and bath counts so we compare apples to apples.  

If you have a bermed house where it is built into the side of the land, then technically you have no fully above grade area with no bedrooms, bathrooms or square footage in the GLA (gross living area) That is why if you have one of these homes to appraise you need to find at least one more sale of the same style so you can see how it impacts value. The report will look odd with no bedrooms, baths or GLA, but this will have to be dealth with. There may be an excpetion to the rule made by the Appraiser to include this area in GLA but they will have to note the appraisal accordingly and it is up to the lender if they will accept this exception made by the Appraiser to include bermed houses into the GLA rather than show it as all basement space. 

Another issues is that ANSI requires that at least 50% of a ceiling area in a room be 7 feet or higher. So for those older homes that have low ceilings or those bonus rooms which have a steep pitch with only the peak meeting the 7 foot rule, this entire area cannot be included in the  GLA, square footage calculation. So what is an Appraiser to do? Per the guidelines the Appraiser can give value to such as bonus room if deemed reasonable to do so by adding a line item adjustment for this area. If the entire home has below 7 foot ceilings, which is rare, a special exception will have to be considered by the Appraiser and lender.

So what other issues do we have here? For a period of time we will NOT know if the Appraiser used ANSI guidelines on the comparable homes we are reviewing. We already know that the tax assessor and courthouse records do not. This leaves a great deal of discretion to the Appraiser. Truthfully, we have always had to use discretion before because sometimes we had prior appraisal measurement data for the comparables and sometimes we only had courthouse records, which are notoriously incorrect when it comes to more than 1 story homes. We have had to call Realtors, or use our prior experience in knowing which numbers seem off when it comes to square footage data.

So bottom line is it will take several months for this new process to become the norm moving forward since we can go back as far as 1 year for comps. Although in this market we try very hard to restrict that to no more than 6 months or even less. If we lack sales, we go back further in time and make adjustments for increasing values. 

A perfect example of Appraisers using discretion is if you are in a new development setting. You appraise and measure floor plan known as "A" and you use a comparable sales with the same floor plan "A" but the data whether it is from builder or courthouse shows a different number than what you as the Appraiser measured, you can use the exact same square footage number in the report for this sale as the one you just measured so there is no issue with value. 

So as a Realtor or Homeowner you can look at that sketch and tell fairly easily if the staircase from above leading down to the lower level was included in the sketch and the other part of the foyer was cut out of the 2nd floor and if basement space was separated or not from the GLA. 

Thanks for reading and please SHARE as you see fit. 

Questions? Just ask!