Demystifying Variable Square Footage

One only needs to spend a few minutes browsing listings online to recognize wide variations in how square footages of property are listed. Some square footage listings match the County Auditor’s records and others grossly exceed that number by lumping together all living spaces in a property. A property with higher square footage may be attractive to buyers seeking a larger home. They also have a lower price per square foot as compared to other listings. Understanding how appraisers measure the square footage of a property can help you counsel clients on the variances in how square footages are measured.

The term appraisers use is “Gross Living Area” or GLA. How an appraiser determines the GLA of a residential property is generally governed by the American National Standard or ANSI and lending guidelines set by Fannie Mae, VA or FHA. Although real estate agents may view porches, patio areas, unfinished and finished basements as useable square footage, they are not part of a property’s GLA. When an agent adds these livable areas to total square footage for a property, it results in artificial inflation of a property’s true square footage. Consequently, the buyer may believe they are buying a home that is larger than the appraiser determines.

An appraiser will consider things like whether the space is a permitted addition, is of the same character and style as the rest of the home and has a permanent heat/cooling source. Thus, a three-season room would not be included as GLA. Generally, an appraiser will also exclude any below grade area, even if the area is finished. Fannie Mae guidelines exclude any below grade property from the GLA calculation, including finished walk-out basements and basements with full egress windows. Thus, a finished basement, even if it looks and feels like an extension of the home, will not be included as GLA.

In 2015, to be more consistent with ANSI standards, the Franklin County Auditor changed how it determines the taxable square footage for a property, to exclude finished lower-level space. This exclusion includes finished space as well as walk-out basements.

One exception would be for what the appraiser determines is typical in the market or the property is not a traditional home. An example permitting deviation from the below grade/above grade approach are homes that are splits (three or five level splits), as one or more levels are partially below grade.

Helping buyers understand the differences between how an appraiser will calculate the GLA and how a licensee will calculate the square footage will help avoid confusion in a transaction. This information will aid buyers in fully appreciating the size of the property and how it is likely to be valued by their appraiser and/or lender.