A common question agents have is “How do I measure square footage”? Hopefully, you’ll find the answers below.

“What exactly should Total Square foot include” from an appraisal standpoint?

By Larry Curriston, North Michigan Appraisal

Appraisers typically have to answer 3 questions about the square footage of the home:

1. ABOVE GROUND SQUARE FOOTAGE; includes all livable space that is “heated” and “finished” to the same quality as the main floor of the home. That would include any heated and livable enclosed porches, as long as they are used year-round. Any unheated areas such as decks, porches, etc would not be included. It also does not include any areas that are below ground, even if it is ¾ above ground. A good rule of thumb is if the above-ground portion has wood framed flooring and walls and the lower portion is partly cement block walls and concrete floor, then you would split the two into above and below-ground portions and the below-ground would be considered basement.
2. BELOW GROUND SQUARE FOOTAGE; (Basement) This is the lower part of the home that has the concrete walls and floor, no matter if it is finished, a walk-out, has windows and doors, completely buried, etc. (an all-weather wood foundation would be the exception to this rule, it is still a basement as it is partially below ground).
3. BELOW GROUND FINISHED SQUARE FOOTAGE; This is the percentage of the “below ground square footage” (basement) that is finished and livable, it is important as appraisers to know exactly what is in the basement if it is 100% finished, is there simply a large family room with no partitions, or is the basement framed and has a family room, 2 bedrooms, a bath, and office. Both are 100% finished, but of course, the cost to build is much higher for a partitioned basement and as appraisers, we give a great deal more value to the high-quality finished basement, than to an open family room.
4. You should never mix the bedroom and bath count between the basement and above-ground areas, as it can be very confusing. If it is listed as a 5 bedroom, 3 bath home with a finished walkout basement containing 2 bedrooms and a bath downstairs, is it actually 7 bedrooms, 4 baths? Or does it have 3 bedrooms, 2 baths upstairs and 2 bedrooms, 1 bath in the basement? If it has only 3 bedrooms, 2 baths in the above-ground area, then as appraisers we consider it a 3-bedroom home with a finished basement containing 2 bedrooms. As realtors, buyers, or sellers, it would be considered a 5-bedroom home, and I can certainly see from a marketing standpoint wanting to list it as a 5-bedroom home, but as appraisers a simple comment about exactly what rooms are above grade and what rooms are below grade would be very helpful, due to our reporting requirements.
5. OK, now for the real question, out of all of this, what exactly is “total square footage”? My opinion of this would be simply a combination of the above-ground and the below-ground square footage (both finished and unfinished). So if you have a 1,000SF ranch on a full 1,000SF basement that is 50% finished, you also have an enclosed 3-season porch (not heated), a deck, a patio, and a 500 SF garage. You would combine the above-ground and below-ground for a total of 2,000 SF to obtain the Total Square Footage of the home. If you had a 3,500 SF home that has a total square footage of 4,500 SF, then you would know that 1,000 SF of that is a basement, then it is just a matter of knowing what percent of the basement is finished and what quality finish that might be?

ANSI Square Footage Standards: What Agents and Appraisers Should Know

Their Key Takeaways:

• As of April 1, 2022 Fannie Mae began requiring the ANSI home measurement standard for appraisals of single-family homes.
• Since the standard is not used universally, you may see discrepancies between the living space reported by the appraiser and the living space showing in public records data.
• Fannie Mae has issued FAQ to answer questions about the standardized property measuring guidelines.

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Let’s say you take a listing on a nice little Cape Cod–style home that has 1,000 square feet on the main floor. The second floor, with two bedrooms and a bathroom, measures 500 square feet. You sell the property and, when the appraisal comes back, it shows only 1,000 square feet of above-grade space. What’s going on? Has the appraiser made a mistake?

The answer is no, and here’s why.

As of April 1, Fannie Mae requires the ANSI home measurement standard for appraisals; that standard has guidance on what constitutes living space that may differ from your understanding. It’s the only one of the secondary financial agencies—so far—that has officially adopted this standard. Other government lending institutions (Freddie Mac, FHA, VA, and Rural Housing) indicate that they’ll accept the ANSI standard, but it’s unclear if they’ll accept Fannie Mae’s protocol when there are portions of the property that are used as living space but aren’t classified as living space under ANSI.

Key Elements of the Standard

ANSI stands for the American National Standards Institute(link is external). It’s a private nonprofit organization founded in 1918 that administers and coordinates the U.S. voluntary standard and conformity assessment system. ANSI doesn’t develop standards itself but provides a framework for setting them in a wide range of disciplines. The ANSI home measurement standard is one of several; another commonly used standard is the American Measurement Standard.

The ANSI home measurement standard has a few key elements that you should be aware of:

1. It applies only to single-family housing. It doesn’t apply to apartments, condos, or commercial property.
2. The measurement standard is from the exterior walls and includes the area on each floor above grade based on exterior measurements including stairwells but excluding open areas.
3. The standard requires a minimum ceiling height of seven feet. In second-story areas with sloped roofs living area starts at 5 feet on the slope, and 50% or more of the ceiling has to be 7 feet or above.
4. Living space that is below grade, even if it’s only a foot or two, is to be considered basement space.
5. The standard requires that the property to be measured to the nearest inch or one-tenth of a foot.

In the case of our Cape Cod home, its second floor has a ceiling height of 6 feet 9 inches. Under the ANSI standard, none of that space is considered living space. Fannie Mae guidance indicates that the space should be included and valued appropriately but is not to be reported as above-grade living space; rather; it must be reported on the lower section of the adjustment grid as another item. However, bedrooms and baths found in this space are to be reported as above-grade bedrooms and bathrooms.

If you are confused, you are not alone.

A host of potential questions and problems accompanies the adoption of this standard, including how to treat functional space that’s not defined as living space by ANSI. Fannie Mae has issued an FAQ that should answer many agent questions and provide guidance to appraisers on how to deal with individual situations. In addition, Fannie Mae’s Selling Guide includes a section on how gross living area is measured and calculated(link is external).

The Quandary: Conflicting Data

Why did Fannie Mae adopt the ANSI standard? Millions of appraisals are submitted to Fannie Mae every year, and the agency determined that a national standard was needed to improve the consistency and reliability of appraisal reports when it comes to living area determinations.

Getting to that national standard is easier said than done.

Much of the information about property physical characteristics is obtained from public record sources that are usually developed by the county assessor. Some counties have adopted the ANSI rule and some have adopted the AMS. Others follow local tradition and practice. There are some differences in the two most common home measurement standards. For example, in addition to the issue of ceiling height, the AMS doesn’t include stairwells in the living area, whereas ANSI does; that leads to discrepancies between appraisals and public records.

It is in our interest, as competent real estate professionals, to be aware of the ever-changing valuation landscape so that we can help our clients better understand the appraisal and financing process. In most areas, there are likely to be only minimal discrepancies between public records and the appraisal. But when those discrepancies are significant, it’s important to understand why they exist and to be sure the space is being valued properly. Broad adoption of the ANSI standard by the secondary mortgage market would reduce confusion.

How is the gross living area measured and calculated?

From FannieMae –

Gross Living Area

Appraisers must follow the Square Footage-Method for Calculating: ANSI® Z765-2021 (“ANSI standard”) when measuring, calculating, and reporting the gross living area and non-gross living areas (basement, additional structures, etc.) of the subject property for most property types. Appraisals requiring interior and exterior inspections must follow this standard; appraisals of this type performed without using this standard will not be acceptable. 

Note: The ANSI standard cannot be used to measure apartment-style units in condo or co-op projects; however, it must be used for any non-apartment style dwellings including townhomes, rowhouses, and other detached single-family homes. When measuring apartment-style units in condo, or co-op projects; the appraiser should use interior perimeter measurements. The ANSI standard also does not apply to two- to four-unit properties. 

The most common comparison for one-unit properties, including units in PUD, condo, or co-op projects, is above-grade gross living area and below-grade square footage. The appraiser must be consistent when reporting the finished above-grade gross living area, below-grade square footage, and room count. The need for consistency also applies from report to report. For example, when using the same transaction as a comparable sale in multiple reports, the room count and gross living area must not change.

When using sketching or 3D scanning software, the resulting output must also conform to the ANSI standard. See Exhibits for Appraisals in B4-1.2-01, Appraisal Report Forms and Exhibits for additional information on sketches and floor plans.

Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. Fannie Mae considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count. Rooms that are not included in the above-grade room count may add substantially to the value of a property, particularly when the quality of the finish is high. For that reason, the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the Basement & Finished Rooms Below-Grade line in the Sales Comparison Approach adjustment grid.

Detached structures with finished square footage must be reported on a different line in the adjustment grid and not included as part of the subject’s reported gross living area.

When the subject property has an area that does not meet the ANSI minimum ceiling height requirements, the additional square footage must be reported on an additional line in the adjustment grid and an appropriate market adjustment applied, if warranted. Additionally, the appraiser must provide and explanation in the report for how this area was handled in order to comply with the ANSI standard and also acknowledge any contribution of the additional square footage.

If the appraiser is unable to adhere to the ANSI standard they must enter “GXX001-” at the beginning of the Additional Features field of the appraisal and provide an explanation of why they were not able to comply. For example,  the appraiser is performing an appraisal in a state that requires adherence to a different measuring standard. Such loans may still be eligible for purchase by Fannie Mae.

Calculation Guide

FAQ

Square Footage on Moxi

For agents using the MoxiWebsites:

Square Footage Upgrade in Moxi
A very useful functional update has been added to MoxiPresent. Users now have the ability to choose from these 3 options when displaying square footage:

• Total SQFT
• Total Finished SQFT
• Above Grade Finished SQFT

Click Here for an article on choosing the square footage calculation in MoxiPresent.

For more info on MoxiPresent Click Here.