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ANSI: I’ll Tell You What You Can Do with This ANSI Stuff!
by Richard Hagar, SRA
One would think that we’ve had enough of this standardization stuff…but no!
With Fannie Mae’s recent announcement, ANSI has become the latest buzzword and blog complaint in the appraisal world. Starting on April 1st (April Fool’s Day…) FNMA wants all appraisers to use the ANSI method when measuring homes and determining square footage. This isn’t new, it’s been around for a long time. ANSI stands for the American National Standards Institute and the information on their website explains what I’m talking about:
THE AMERICAN NATIONAL STANDARDS INSTITUTE OVERSEES STANDARDS AND CONFORMITY ASSESSMENT ACTIVITIES IN THE UNITED STATES.
ANSI’s mission is to enhance both the global competitiveness of U.S. business and the U.S. quality of life by promoting and facilitating voluntary consensus standards and conformity assessment systems and safeguarding their integrity.
ANSI facilitates the development of American National Standards (ANS) by accrediting the procedures of standards developing organizations and approving their documents as American National Standards (ANS). This process serves and protects the public interest since standards developers accredited by ANSI–and the ANS they develop–must meet the Institute’s requirements for openness, balance, consensus, and due process and adhere to ANSI’s neutral oversight, assuring that all interested parties have an opportunity to participate in a standard’s development.
This organization has been around since 1918 with the goal of making things produced by different companies, work better; and they do this by creating voluntary standards. I can hear a few appraisers out there now stating, “Yea, yea I’m an appraiser why do I care about how they make the nut and bolt threads of the World work together regardless of who makes them? Besides I’m an American, I hate some agency telling me what to do.” I understand their point but read on.
When I was studying to become an architect, I saw all sorts of different ways to display the exterior walls of a house. Some plans indicated measurements from the living side of the exterior wall, others from the middle of the wall, some were measuring from the exterior surface of the wall and plenty were measuring from the foundation wall. Depending on the method used and starting point for the measurement, a house could vary by hundreds of square feet. And depending on the method used by the architect, builders might not order enough, or too much, paint, sheetrock, carpet, cabinets, etc. The variables impacted costs as well as what a buyer paid for a house. In most new homes that I’ve appraised, what the buyers believed they were buying and the size they ended up with, were completely different (which triggered complaints and lawsuits). A standard can help reduce these problems.
Staircases
Let’s start with stairs. Do they count as the upper floor, the main floor, the basement or should they even be counted at all?
I first ran across this problem in a house that had stairs that were 6 to 8 feet wide, fully open on the sides, and at every 5 feet there was an 8 by 8 landing with furniture. You could walk under the floating stairs and every landing was used as living area. Would this space count as a second floor? Some sort of middle floor? Or the main floor? Confusing, isn’t it!
Well, a second story is typically considered an area above the main floor. So, what’s the standard? The stairs and landings were above the main level and functioned as a second level. The stairs were counted as part of the upper floor. Imagine how different appraisers in different parts of the continent would describe these areas; this is where a national standard would help.
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Basements
Oh boy, let me tell you about Prescott Arizona and basements. The county assessor typically indicates the total square footage (SF) for the entire house, including the basement and entire above grade living areas as one lump-sum number. I’ve even seen them include detached buildings and casitas (ADUs) in the SF of the main house.
As an example: The county indicated that a comparable had 2,000 SF. However, upon driving by the sale it was easy to see the house was not that large. The Assessor’s website had a floor plan (if appraisers would take the time to look at it) that clearly indicated that there was 1,000 SF above grade and 1,000 SF below grade, in a windowless, unfinished “basement” but they included all of the square footage in a lump-sum total.
Looking at what others were showing on their appraisals, five appraisers indicated that the house had at least 2,000 SF above grade, some indicated nothing in the basement, and two of the appraisers indicated 2,000 SF up and another 1,000 SF in the basement. So, 2 of the appraisals indicated that the comparable had 3,000 SF, while 3 of them indicated no basement and included the unfinished SF above grade. Needless to say, all five had incorrect square footage (by 33%), incorrect SF adjustments and adjusted sales prices. Their value conclusions were more like wild guesses than reality, based on facts. When compared to the competent appraiser, who was indicating the correct square footage, the 5 other appraisers look like overpaid hacks. Not the best way to present yourself to your client…unless you want future appraisal orders and higher fees.
In talking to a couple of the appraisers, it was clear they didn’t understand that, for “FNMA appraisals” below grade areas need to be separated from above grade living areas. Here’s where ANSI brings clarity to our process. The standard clearly indicates that if any area of a floor is below grade (the dirt line), no matter how small, then that floor is classified as being below grade. The ANSI book has several drawings that clearly show how this works. The whole point here is for all appraisers to get on the same page when describing above and below grade square footage and the ANSI standard helps. Now, how above and below grade square footage impacts value or should be adjusted…well that’s a whole other class on the topic of adjustments.
Assessor’s Square Feet
Here’s something I hear all of the time: “Why not use what the assessor indicates at least that way the subject and comparables are using the same system?” Well yes, no and maybe. Not even county tax assessors have a single uniform method for obtaining square footage. Some tax departments use:
- SF supplied by the builder on a permit application form,
- SF supplied by the floor plan when it was submitted for permits,
- SF based on aerial photographs (which usually includes the overhanging roof line making the house larger than reality).
- SF taken from the homeowner when they turn in a professional appraisal as part of a tax dispute.
- Physical measurements by a tax assessor.
- And, In Montana (as well as a few other states) many of the homes are built without building permits. The assessor, once they determine that a house even exists, stands on the nearest public road and uses a laser to pinpoint the corners and estimate the SF. There’s no opportunity for them to determine the space of large-vaulted areas in an entryway.
For the most part there’s not even a standardized method within the same assessor’s department.
Complicating matters further are the builders. Years ago, when I worked for a builder and submitted plans for a building permit, the proposed square footage was listed on the plan, which was hopefully, accurately, conveyed to the tax assessor. However, if during construction, a site problem developed preventing the house from being as big as planned, or if a buyer wanted the house to bump out 4 here or 3 feet there, or even change the plan from a ranch to a home with a basement, we didn’t go back and get a new permit; we simply made changes on the spot. In my 30 years of appraising, actual measurements of a house equaled what the county assessor showed maybe…4 times. In other words, the square footage indicated in the tax records are off 99.9% of the time; if possible, this is not something you want to rely upon (Welcome to Seattle, Prescott, and Montana). Why would anyone want to rely on something that was widely variable and known to be inaccurate?
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Solutions Squared or…
In the sales comparison approach, if an appraiser uses incorrect square footage supplied by the assessor for the subject and each of the three comparables, then their appraisals are going to be off by at least a factor of 4. You have errors piled on top of errors. At least when the appraiser accurately measures the subject and still uses the questionable SF of the comparables, the error factor is reduced by at least 25%. And if both the subject’s and a comparable have the correct square footage then the error factor is reduced by another 25-33%, all of which makes the appraisal more accurate (that’s the goal). All of this comes about due to more people using the same standard.
If an appraiser uses incorrect square footage for the subject which was supplied by an error prone tax assessor, then the cost approach is going to be off. This might explain why some appraisers skip the cost approach by claiming it’s not credible. Or maybe it’s because your square footage information is flawed. Solution: measure the house using the ANSI standard which increases the accuracy of the cost approach and credibility of your work.
Rounding Madness
When measuring a house, some appraisers round to the nearest foot, others 2 feet, while the more competent appraisers round to the nearest inch. Yes…inch! If you are in the field and start off by rounding to the nearest foot that means some, if not all, of your measurements are going to be off by 6 inches. Even for a rectangle if you round by 6 feet on every side you can be off by a dozen square feet or more and if the house has multiple sides. You can be off by a hundred or more square feet. Now what happens when drawing it on the CAD program and walls don’t align, do you “round” again? So, rounding multiplied by more rounding? What’s next more rounding on adjustments and the final value. Wow! Just how much slop is being introduced in your reports? That’s not a good way to provide a service to a client.
When we measure the subject, we measure to the inch and if there’s any rounding that’s done, back in the office and we’d adjust the wall that has the least impact on the total square footage. I know it sounds nit-picky but in our fuzzy information World, trying to be accurate is one of the things we have some control over. Besides, if a reviewer compares my work to someone else’s, at least I can convey the fact that I tried to be accurate vs some other appraiser who rounded every measurement, adjustment and value conclusion. Being as accurate as possible makes any appraiser look better and worthy of higher fees (the goal right…).
What You Can do With This Standard
Every competent appraiser I know has been using the ANSI (or similar) standard for 20+ years. Currently, I have two trainees and I’ve taught them the standard. So, for our office, this isn’t going to impact us one bit, and hopefully it won’t impact yours.
Yes, some appraisers are going to moan and complain about the standard. Many old dinosaurs are going to complain and state that they aren’t going to change their ways. OK don’t.
I’ll tell you what you can do with this standard: Follow it and do it right…or don’t and your appraisals will start to fail in the review process. Be competent and get paid more or…don’t. How much you are paid is up to you. We do it right and receive some of the highest fees in the area (Washington and Arizona).
The Solution: More Education!
There are going to be numerous classes put out this year (one by John Dingman) teaching the ANSI standard. Even if this “stuff” is old news to you, I’d still recommend taking the class, comply with the new requirements and get paid more…or not. Welcome to the American way of free enterprise and competition.
Trying to keep you safe and profitable out there!
About the Author
Richard Hagar, SRA, is an educator, author and owner of a busy appraisal office in the state of Washington. Hagar now offers his legendary adjustments course for CE credit in over 40 states through OREPEducation.org. The new 7-hour online CE course How to Support and Prove Your Adjustments shows appraisers proven methods for supporting adjustments. Learn how to improve the quality of your reports and defend your adjustments! OREP insureds save on this approved coursework. Sign up today at www.OREPEducation.org.
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Send your story submission/idea to the Editor:
isaac@orep.org
by brianbonham83@gmail.com
I completely agree. I just finished a home that the lower level is partially below grade ultimately removing 586sf from the “finished” GLA. The agents, buyer, and seller are going to have a heart attack and will not understand that this is now a required technique.
-by Tricia Ramos
So now that you did it correctly with ANSI standard, but the lower level is still given similar gla adjustment due to being fully finished like the main level?
-by Kevin Henley
Have you been REPORTING your linear wall measurements to the nearest foot, or 1/2 foot, but measuring, in the field, to the nearest inch or 10th of a foot? Or, when you have submitted your sketch on your report, are your walls reported to the nearest 10th of a foot or inch? This is my biggest issue, as all auditors in the areas I appraise report the linear wall measurements in averaged feet, not to the 10th or inch, even when they receive ANSI reported, blue prints, the auditor, in turn, reports the walls average to the nearest foot. I emailed a rep at Home Innovation Research Lab about this and his reply was, ANSI does not have reporting requirements, only measuring requirements. Open for discussion and interpretation.
-by Diana L Harms
The counties I do are farily accurate. THE LOCAL CUSTOM IS AT ISSUE. APPRAISED HOME BUILT IN TO HILLSIDE –5 LEVELS 3 LEVELS ASSESED AS ABOVE GRADE AND 2 BASEMENT LEVELS ( ROXBOROUGH PARK, CO AREA). PER ANSI THIS IS HOME WITH NO ABOVE GRADE SF. ALSO HAD” SPLIT LEVEL THAT ASSESSOR DETERMINE TO HAVE 1800 SF OF GARDEN BASEMENT WITH ADDITIONAL 4TH LEVEL BASEMENT. THE 1800 SF WAS CONSIDERED ABOVE GRADE –WITHDREW FROM THIS ASSIGNMENT. I CAN SEE IMPLEMENTATION ==EFFECTIVE 2022 BUT GOING BACK IN TIME. I SEE CLASS ACTION SUITS FROM OWNERS LOSING MAJOR GLA. OWNERS REQUESTING DECADES OF TAX REIMBURSEMENT. RECENT ONE WITH SPLIT LEVEL 900 SF+/- AND NO BASEMENT WITH NO LOCAL CUSTOM HOME WOULD BE ABOUT 550 SF WITH REMAINING FINISHED WALKOUT BASEMENT. LAWSUITS GALORE. DIANA HARMS
-by Jamie Owen
Richard, beautiful article! I whole heartedly agree with everything you stated. I’ve also been using ANSI Standards before Fannie Mae’s announcement was ever made. When there are issues with ANSI Standards and what the market considers to be living area, it can be addressed and accounted for without being misleading. I think appraisers using the same standard is beneficial to us in many ways, some of which you mentioned. I am appraising a home this week with over 21,000 sq ft of above ground living area, several arched walls and plenty of angles that were not 90 degrees. If I had not rounded to the nearest inch, it would have caused my sq ft to be incredibly different from reality. Thanks again for a great article and for all you do in our profession!
-by PAUL MIDDAUGH
In Indiana the State Code requires that for tax assessement everything be rounded to the nearest foot and that any upper level to be considered as having the same area as the first floor then a factor be applied for the partail second floor to derive a value. The Realtors all use the assessor’s gla for their listings with full aproval of the State’s Association of Realtors.
-To me we are going to be comparing apples to organges for GLA until there is an enforcable standard of measuring required by NAR.
by Steve Owen
Great article, Richard. I’ve been using ANSI since about 1996. Over that time I have heard a number of arguments, some of which might seem to make sense, but most of which are pure nonsense. You described the “to the inch” controversy perfectly. Let me add one thing. When I started using ANSI, I discovered that measuring to the inch is actually easier than trying to round at each stop. My tag line when I talk to real estate agents is “ANSI stands for EASY.”
Another common misunderstanding concerns areas that don’t qualify as above grade finished square footage. Just because an area isn’t 7 feet ceiling height does not mean that area doesn’t have value. It just can’t be counted in finished square footage and must be dealt with separately. One lake-area Realtor once made the argument that the basement in some lake houses might be worth more than the first level. Instead of arguing, I agreed with her, and made a new convert in the process. Just because it is worth more, doesn’t make it above grade. Don’t confuse not counting it as above grade finished square footage with whether or not it has value.
-by Brian Street
I am all for everyone using the same system, including the Realtors and Assessors. But without them onboard we are applying incorrect GLA adjustments. Like many, I do not like the under 7′ rule as this just causes more confusion. While I measure to the inch I have never taken out stairs from a level, I can’t figure out how to easily do it in Total and two what if the area below is a closet, doesn’t that count? Again I get the need to have 1 system but we are the only ones using the system!
-by Dudley Tyson
A few years ago, my statewide MLS decided to use ANSI as the required method of determining GLA. They offered a course and required a four question test for real estate licensees. Passing the test was required in order to disclose the GLA in the MLS listings. The uproar was overwhelming. It was so great the MLS retreated, saying it was only a “suggestion”, not a requirement. And the ANSI requirement died. I do feel ANSI is a good way to go. But with some flexibility. Ceiling height is a problem. If a justification could be made for the use of areas under seven feet in height, that would be acceptable.
-by Robert Mossuto Jr
With great respect to Richard, the subject of Cape Cods with second floor ceiling heights under 7 feet was not covered. This little hiccup in ANSI is going to create some significant turmoil for appraisers. In essence if the second floor has 3 bedrooms and 2 bathrooms and is 1,000 square feet, but the ceilings are 6 ft, 8 in, none it counts! If the main floor has no bedrooms and a half bath, and is 1,300 sf, that is what is placed in the improvements section and grid. It would look like 6/0/0.1 – 1,300 sf vs what the market sees as 6/3/2.1 – 2,300 sf. Who is going to take issue with that? Real estate agents, buyers, homeowners, attorneys, and more. Fannies Answer; count it at the bottom of the grid. Well…that’s fine, I guess. One line for bedrooms, one line for bathrooms, and the last line for Perceived?? living space??? Now where do I put the shop, the ADU, the fencing, the fireplace, or any number of other things could affect value? Do they just get left out?
Then there’s the question about my comparable selection. Do those Cap Cods have 6.8-foot ceilings or 7-foot ceilings? Well…How would I know that? I suppose I could knock on the door and ask the owner if I could run upstairs and grab a quick measurement! I can guarantee the assessors didn’t measure it! Heck, In Grays Harbor County, the assessors don’t have time to measure the outside, much less the ceiling height. And what real estate agent do you know that measures anything?
When talking an inch hear, an inch there and the stairwell space; your talking peanuts when compared to losing an entire 2nd floor over an inch or two!
So, there are some fallacies with the ANSI requirement, which I stressed during their last update and was blown off. So… with Fannie once again tightening the screws with ANSI, a lot of appraisers are getting antsy!
-by Brian T Lucas
Best thing to ever happen, they need to pass it along to the realtors & start charging them with Fraud when they blatantly lie about Square Footage GLA, they simply get out an addenda & have ignorant buyers sign them, that they guess what the square footage is of the property is. But that is why they hire me, I have been measuring to ANSI standards since I started in 2000, there is no guess work, you have to support what you say. I worked for a Steel Company, making sure the measuring devices met ANSI Standards for 16 years, its very important. You need to know what your buying, BE EDUCATED, if you are not competent your in violation of USPAP, simple as that.
-by Loren Zimmerman
Good article on ANSI Richard. Today I’m writing a report for a home in Post Falls Idaho where the main living area has one full wall (105′) built-into an up slope with a finished basement below. 4,279 sf main living area and 933 sf finished basement. Nothing above grade!
-by Pattee Spott
As usual, Richard Hagar hits the nail on the head!! I’ve enjoyed a number of his courses due to his extensive knowledge, wicked sense of humor and, above all, common sense! I’ve been using ANSI since day one of being a Certified Residential Appraiser because if anyone questions my Gross Living Area, I can fire back back with a response saying I used the ANSI standards and Fannie Mae or FHA guidelines, used by millions worldwide. When the agents says the used “the Assessor’s area” I can explain, since I worked for the Maricopa County Assessor at the beginning of my appraisal career, that the Assessor uses “building area”, not LIVING area. Big difference. Many times when I find out that an addition for the subject or comps is not permitted, not heated, and not built in a workmanlike manner, I make the correction to the Gross Living Area and explain it in the comments, so EVERYONE knows why. I also report the discrepancy to the agents, so they can correct the MLS. This saves you from countless inquiries and saves the NEXT appraiser from wondering why the comps don’t seem to make sense when the GLA is incorrect. Thank you OREP for educating us and for featuring Richard Hagar to entertain us as well!
-by Richard Troyer
Excellent article Mr. Hagar. Thanks for telling it like it should be. I’ve been using the ANSI standard since I began in 2003. Tax records are nearly always inaccurate. I’m also very thorough in my market research & report analysis. Consequently, my clients are now paying me high fees and about 65% of my business is high value, complex, lakefront, or larger acreage properties with high fees. I’m an appraiser; not a form filler.
-by Scott Wachter
Maybe, in your “30 years of appraising, actual measurements of a house equaled what the county assessor showed maybe…4 times” because you’ve been using a different standard than the assessor? Your anecdotal evidence throughout the article is underwhelming. For instance, your statement that “In talking to a couple of the appraisers, it was clear they didn’t understand that, for “FNMA appraisals” below grade areas need to be separated from above grade living areas” has nothing to do with whether or not a standard is in place – it is. It has everything to do with appraisers not following that standard. Using ANSI standards does NOT solve the problem of differences between the measurement of the subject and comparables when the source for the square footage of the comparables is the assessor or the real estate agent’s estimate. You can measure a property down to the micron, but when you’re comparing it with another measurement that doesn’t use the same standard, what’s the point?
-by CLAIRISSE VANDEMARK
Great article Richard! Straight forward and pertinent.
-by James Scholl
Mr. Hagar misses the point.If a subject property 2nd floor ceiling is 6’6″ I can easily measure it and comply with ANSI. The neighborhood comps may or may not have 7 ft ceilings. Our assessors and agents don’t know and there is no other source. I do hope Mr. Hagar will respond and tell me how he does this in his market over the past 20+ years. Personally if I were with Fannie Mae I would have suggested contacting the assessor organizations and use their method.
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