Measuring
Up: Understanding ANSI Standards
By Scott Austin
“Would you mind going back to the house and re-measuring? There is more than a five percent difference in GLA (gross living area) between your sketch and that of the other appraiser.”
I received this question from a specialist with a large relocation company. As per Employee Relocation Council (ERC) standards, my appraisal was one of two ERC appraisals required prior to purchasing a home from a transferee. So, what is one to do in this scenario? Should both appraisers go back and re-measure hoping for a different outcome? The answer I gave the relocation specialist surprised her.
“Actually, my sketch of the house has to be correct,” I told her.
“How can you be sure?”
“Well on the main level, my front and rear measurements were within a tenth of a foot of each other. My side measurements were within a tenth of a foot of each other. My second floor sketch also worked out beautifully. And, I measured the house using the ANSI Z765 standard.”
“The what?”
“Well, ANSI Z765 is the only recognized standard for calculating square footage in houses. And the ERC was one of the original sponsors in the process of drafting the standard.”
“Really? Well… I’m going to call the other appraiser.”
That ended the discussion and I never heard another word about it. On another occasion I had a homebuilder turned mortgage lender challenge me. “None of you guys (appraisers) measure a house the same way. It’s not like there’s any one way to measure a house.”
“I can’t speak for other appraisers but I always follow the ANSI standard when I measure a house,” I told him.
“What’s that?” he questioned.
“Well John, you’re a former homebuilder. The process that created the ANSI standard was actually commissioned by the National Association of Homebuilders (NAHB). You haven’t heard of it?”
History Lesson
In 1915, the Building Owners and Managers Association International developed a
standard for measuring commercial buildings. The standard has been revised many
times over the years and is today officially known as ANSI/BOMA Z65.1-1996. The
process for creating a residential standard did not begin until 1994, with ANSI
Z765 finally born in 1996. The
standard was recently updated and is now called ANSI Z765-2003.
It is the only nationally recognized standard for measuring houses and
townhouses.
Like any system of weights and measures, this standard for measuring houses provides a means of accountability for the practitioner of that standard. As a result, the intended user can have a reasonable degree of confidence in the results of a sketch provided in an appraisal or gross living area (GLA) provided in an MLS listing. This is where ANSI comes in. It brings common sense to the process of calculating square footage and in so doing, lends credibility to those willing to voluntarily adhere to its careful guidelines.
One of the best arguments for using the standard is found by looking at the list of organizations that took an interest in its original development. These are a few of the 26 organizations represented in the process: Fannie Mae, Freddie Mac, HUD, VA, Appraisal Foundation, National Association of Homebuilders, Manufactured Housing Institute, American Institute of Architects, National Association of Realtors, and the Employee Relocation Council.
Without question, if I am appraising a property for a VA loan, and the selling agent calls me with a question about the subject’s size, I am going to refer her to the ANSI standard and to the involvement of the Realtors and the VA in its development. The fact is, most people associated with the organizations that developed this standard have never heard of it. When I suggest this is “your standard,” they generally confess their ignorance and quietly back away. I don’t have to rely on my own credibility. I merely follow the standard and allow it to speak for itself.
Risk Management
In this increasingly litigious society, appraisers are finding themselves in the
crosshairs of disgruntled clients and property owners. One of the major reasons
appraisers find themselves in court is square footage calculation.
Because square footage is documented in black and white terms,
significant discrepancies in its calculation make for an easy target in court,
where an appraiser’s credibility can be called into question. If I can lean on
the credibility of the ANSI standard in a case where the other appraiser cannot,
my credibility is enhanced. (To see how one appraiser won in court because they
followed ANSI, please see below.)
ANSI & Cost Approach
For years, I have heard appraisers complain that the cost approach is irrelevant
and does not work. I will not speak to its relevance.
I do, however, find my cost approach results to be strikingly accurate.
I know there are several reasons for this, one being that when I measure
my subject, I use the ANSI Z765 standard. I contacted Marshall & Swift and
they confirmed that the manner in which they calculate residential square
footage costs is consistent with the principles put forth in the ANSI standard.
Distinctions of above grade and below grade, as broken down in the cost
manual, are also consistent with the standard.
How can you expect to get an accurate cost approach if your methodology for calculating square footage is not consistent with the methodology used to develop the multipliers in your cost manual? The answer is that you can’t. To accurately determine value using the cost approach, we must be students of both methodologies.
What ANSI Is and Isn’t
The ANSI standard is intended for use in
calculating square footage in detached and attached single-family residences. It
should not be used as a means of measurement for commercial buildings or
apartment multifamily buildings. There are other recognized standards that
should be employed when appraising these types of properties. Also, to date, there is no recognized standard for calculating square footage in
condominiums.
Calculating Square Footage 101
Measurements of each level should be made to the “exterior finished
surface of the outside walls.” When measuring a second floor from
inside the residence, the thickness of the walls should be included in the
calculations. For attached homes it may be appropriate to measure from the
centerlines.
Areas protruding from a finished area may be included as finished, provided they have a floor on the same level as the rest of the living area and meet ceiling height requirements (described in the next section). So, where a fireplace would not be included in GLA calculations, a bay window could be. There would be no deduction for a fireplace which was located within the exterior walls, however. A window box, which protrudes from the exterior but does not have a floor common to the level on which it is located, is not calculated. Full Story Subscribe
Note: The technical aspects of this article were
reviewed for accuracy by staff at the National Association of Home Builders.
Scott
Austin is a residential appraiser in Birmingham, AL.
He can be contacted at ScottAustin1969@aol.com.