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.
When finished and unfinished areas are adjacent to one another the finished area should be calculated by measuring to the exterior surface of the inside wall separating the two areas. Similarly, the measurement of the unfinished area should be from the exterior finished surface of the outside wall to the exterior surface of the inside wall.
If I can’t stand on it, is it GLA?
The two most common misunderstandings regarding calculated area are those areas beneath a sloping ceiling and those open to the floor below. No area may be considered “living area” if it does not have a ceiling height of at least seven feet, with two exceptions. First, areas under a sloped ceiling may be included as living area as long as they have an average ceiling height of seven feet. However, no portion of an area that has a ceiling height of less than five feet may be included as finished. Second, all finished areas with sloped ceilings underneath stairs may be counted as finished area, regardless of ceiling height.
Areas open to the floor below are not included in the calculated area. So in the case of a two-story foyer, only the actual floor area is calculated.
Calculations for stair area should be attributed to the level from which the stairs descend. This is true regardless of the degree to which the stairs/stairwells are finished. The area attributed to the stairs includes the treads and landings but should never exceed the size of the floor opening. For example, a typical stairwell may be four feet wide where it begins its decent from a second floor. If the stair flares to six feet wide at the main level and the opening at the top and is no wider than the treads, then only the dimensions consistent with the opening can be used.
Communicating Your Results
The ANSI standard specifies how your calculations are to be communicated. All area calculations are to be broken down into the specific levels of the residence, either above or below grade (i.e. first floor, second floor, below grade/basement). Furthermore, areas must be designated as finished or unfinished.
Grade is ground level at the exterior of the residence. For any level of a house to be considered above grade, the entire level must be above ground level. Likewise, if any portion of an area is below ground level, then the entire level is considered below grade. Finished is defined as “An enclosed area in a house that is suitable for year-round use, embodying walls, floors and ceilings that are similar to the rest of the house.” Also, implied in this definition, is that a finished area will be climate controlled in a manner consistent with the rest of the house.
Understanding GLA
While the ANSI standard does not specifically use the term Gross Living Area (GLA), its use accurately depicts how GLA is to be calculated. On all current appraisal forms, GLA is understood to mean above-grade, finished area. It is clearly differentiated from below grade areas and finished below grade areas.
Finished areas not connected to the main part of the house by means of a finished hallway or staircase should not be included as a part of the finished area at the same level. Thus, a bonus room over an attached garage, which can only be accessed through the garage, should not be included in the living area of the house’s second floor. Likewise, a detached guesthouse should be described as a distinct area, not gross living area.
The updated edition of the ANSI standard now allows for some decorative concrete floors to be considered finished floors. Thus, some enclosed, climate controlled patios and sun porches may now be included as living area.
Garages, whether attached or detached, are not considered living area because they do not meet the previously stated requirements for finished areas. The principle also applies to utility/storage areas, decks, open porches and open patios. All such areas should be described individually.
The ANSI standard is not intended to supercede any locally imposed system of residential measurement. It may, in many places around the country, challenge longstanding paradigms. The standard is most appealing to those of us who are more interested in getting it right than simply getting it done.
Personally, I was glad when I learned that my state adopted the ANSI Z765 as a supplemental standard. We now have no legitimate excuse for gross differences in GLA measurements.
Those outside our profession consider much of the appraisal process subjective. Adopting the ANSI standard is one step all appraisers can take to achieve a higher degree of objectivity and bring greater credibility to our profession.
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.