Indeed, Size Matters!
Is square footage “really that big of a deal?”
Many agents have asked; “Does this square footage stuff really matter to me? Isn’t it more of an appraisal issue? Fair questions. Let’s take a look at one sale where the agent now understands just how square footage affects a listing value. It was a hard lesson in the importance of square footage, and one they will not soon forget.
The house was listed at $259,900. The tax records showed the heated living area as 2,318. After completing a CMA, it appeared that most homes in the neighborhood were selling between $110.00 and $114.00 per-sqft. Taking an average of $112.00 and applying that to 2,318 sqft, the agent and owner agreed to list the house at $259,900. There was never a discussion of measuring the home, no talk of the square footage from the appraisal when they bought the home, there was never any discussion about square footage. It was simply assumed that the square footage in tax records was accurate. It is the “official record” according to many agent’s viewpoint. This was just the way it was done in their office, and the thought of any potential square footage problems never entered the thought process.
The home stayed on the market without an offer and, after six months, they decided to lower the price. They decided on $254,900 and felt they were offering a good deal too any potential buyer. At this price, they were listed at $109.97 per-square-foot and at the very low end of properties in that neighborhood. The agent was confident this would do the job and they waited. Sure enough, within three weeks after the price reduction they received an offer.
The first offer was $248,000 and after a great deal of conversation, they countered at $252,500 and thought that was their bottom line. For them, who paid $183,900 six years ago and had spent a great deal of time and money working on the house, they just knew the house was worth that amount. They didn’t want to lose the buyer, but also didn’t want to give the house away too cheaply. This time, the buyer said “YES” and the contracts were quickly signed. Feeling partly relieved and partly like they took less than they should have, they decided to focus on the future and find their new home.
They spent the next two weeks looking at every home available on the other side of the county and closer to the husband’s new job. They finally found “the one,” and worked out an agreement to purchase their dream house. The money was tight, but they had just enough for the down-payment with the proceeds they would receive from the sale of their home. Excited about their new home, they looked forward to the move.
Everything was starting to fall in place. The utilities were scheduled to be changed and the moving companies lined up. The home inspection had gone through without issue and as soon as the appraisal was finished, they were set to close. The day of the appraisal came and the appraiser walked through with note pad in hand, taking pictures and pulling a tape measure. The appraiser said thank you, good luck with your move, and he was gone. They thought that seemed pretty painless and felt good about everything coming together.
Three days later the phone rings and it’s their agent. He is in a panic. “Wait, slow down, what are you saying?” The agent tried his best to get it out; the house appraised at $239,000. The buyers are not willing to pay more than the appraised value and we’ve got to get together to talk about our options. Feeling overwhelmed, they agreed to meet the next morning. When the agent showed up, the home owners felt there was something more to the story and asked “how could this happen?” Is this appraiser an idiot? We priced it below where it should have been.
“That’s not it,” the agent told them. “We do seem to have lots of problems with low appraisals these days, but in this case we have an issue with the “size” of your house. I’ve never had this happen before and we have to get this re-checked, and fast. I’ve asked another appraiser to come out and measure your home, just to be sure. Then we’ll decide if we can fight this low appraisal. But, I have your home listed with 2,318 sqft and this appraiser came up with 2,146 square feet.”
The second appraiser came out and carefully measured the home. About two hours later they got the call. This time, the measurements came in at 2,148 sqft. In either case, that’s well below the tax department’s measurements of 2,318 sqft. 2,318 minus 2,148 equals a difference of 170 sqft. That is a huge difference. If you do the math, at $239,900, with 2,146 sqft, that comes out to $111.79 per-sqft. That’s really close to what we thought it should be, and the only difference is in the square footage total we used to calculate the price. I can’t believe the tax department has this large of a mistake. I’ve never seen anything like this before. But, at this point, the appraised value appears to be fair. I am so sorry this happened.
After all was said and done, the buyer was not happy about getting a smaller home than they had been told and were afraid there might be other problems, and they backed out of the deal. The seller could not move forward with the purchase of their dream home, and those sellers also lost a deal on the home they had under contract. When the dominoes stopped falling, six transactions had been killed or delayed. It took a lot of people a lot of time, and caused a great deal of stress all around. Talk about a bad day!
The original listing agent could have avoided all these problems by having the house measured, before they ever determined a listing price. One agent that didn’t think square footage was important, ended up causing a very bad series of events that influenced the lives, hopes and dreams of a large number of consumers (and other agents). So, the next time someone asks you if square footage “is really that big of a deal?” You might want to say that, like most of the real estate industry, “It Depends” can apply to almost every situation. This case might be an extreme, but it’s not as rare as you might think and deals are lost due to nothing more than the square footage number used to calculate the list price. Indeed, Size Matters!
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From my experience open foyers are the Realtor’s largest nightmare. For some reason listing agents refuse to acknowledge that if there is no floor there is no living area on the second floor of an open foyer. Over 20 years I would say that 75% of the listing agents I ran into created this problem for themselves. In retrospect, I now see that it boiled down to sheer laziness.
Northern Kentucky had the wackiest board of Realtors that I ran across. They took a vote years ago and came to the agreement that their agents didn’t need to assume liability for measuring the product (homes) that they were marketing. Rather than list the GLA and basement area they would list the dimensions of every room in a home as well as the dimensions of hallways. In short, they don’t trust their agents to measure the exterior of a home but they trust them to measure every room and every hallway. No liability there…right? Wrong!
any realtor who doesnt know or understand that GLA matters, doesnt deserve a license, and their license should be revoked immediately.
Great story but it’s often not that simple. Various counties have various standards for records keeping. And standards have changed over the decades. And to top it off, builders are not consistent either. All data comes together to form a perfect storm of unreliable sizing data, but still reliable at the same time. How so Baggins, because you’ve just made a completely illogical statement. Well, it’s all about the common standard. If every home in the area was really a 1.2k sq ft, but all county records double dipped on the stairs and other measurement and reporting factors, and all homes were really only 1.1k sq ft, what does that matter? If you’re properly comparing 1.1k to 1.1k or alternatively 1.2k to 1.2k, you’re not getting any unnecessary sizing adjustments. But if you try to walk in there with your all digital super duper equipment and claim you’re the authority on measurements, you’d better back that up with area wide research and a larger comparative sizing example base than just the subject home. As that’s often not a very realistic or cost feasible effort to make, it’s just better form, and moving towards more credible appraisal results, to be some what lenient with small measurement differences. If builders double reported stairs, and an appraiser does not, the appraiser’s emphasis on exacting size measurements and reporting, despite the accuracy, actually under reports the subjects fair equivalent worth. Now if the listing agent reports that basement half as agla, you’ve got a problem. But if your subject is 100 sq ft less, and you’ve got 2 stair sets 5×10, well, you should make note of the extra ordinary assumption, and adjust sketch to match county, or adjust all comps down. With the FNMA UCDP CU system seeking consistent entries, you’d be foolish to utilize the extra ordinary assumption for all comps, and you would be wise to raise up your exacting sketch to double dip on those stairs. FNMA UCDP CU system is an absolute game changer when it comes to the use of extra ordinary assumptions, because it would penalize appraisers with detailed area knowledge, who may adjust those figures out properly. You can bet your bottom dollar that nearly every agent, and most appraisers have been slackers, and merely auto imported data, or utilized shared data. They’re running with county. That’s one group measurement, you can count on. If you find substantial size variance with subject vs county, it’s important you include a special addenda requesting that at closing or through title, someone inform the county to have that corrected, so the subject will be taxed appropriately and fairly. I still use a 100′ tape measure. Always have, always will. They rarely break, have multi purpose usage, and I’ve got plenty of outs when I sit down to draw a sketch. No technical tomfoolery, costs, or additional hassle. Just reasonable assumptions and data comparisons to the ‘common data standard’.
Oh for the good old days when you knew your local lenders and could call the loan officer directly and tell them that the MLS listed the home at 1600 sq ft and your just measured the home and it is only 1375 sq ft. I have had that happen several times. This puts the ball back in the loan officers and the real estate agents hands. I would wait for a response to see if they wanted me to complete the appraisal, not going to happen today. I will just compete the appraisal and let the chips fall where they may. Just a month ago my neighbor was buying a home and the MLS listed the home at 1850 sq ft and public records show 1575. He asked the listing agent where he got 1850 sq. ft and he said from a prior appraisal. He asked if I could measure the home to check the sq ft which I did (for a fee). I came up with a total different square footage. I requested him to get a copy of the appraisal that the listing agent used and he did that. When I measured the home the listing agent was present and insisted that I view the interior which turned out to be a blessing. I noticed an area of the home that protruded in to the garage ( over sized garage) and I commented to the agent about that area. He stated the attached garage was added a few years after the home was built and the original attached garage was converted to living area with permits. I checked with the building department on the permits and found that the new attached garage did not show the protruded area in the new garage and that area was not permitted as living area. This was the major difference in the gross living are however the prior appraisal sketch had some errors in the measurements of the exterior and it included the unpermitted area in the garage as living area. I went back to the home and verified my measurements then reviewed them with my neighbor to show him where the errors where in the appraisal sketch. We all make errors but both the prior appraiser and the listing agent had some red flags that should have made them double check there information.
I don’t mind the laziness of “missing” a vaulted area, or adding Unheated area to GLA. I am PISSED off that Realtor boards allow licensed Agents to list a property with an “estimated”, rounded or derived from owner GLA. It’s 2017. 99% of towns I work in have GLA of every property on line, and in 90% of the MLS systems it is FREE data. Why allow a “Licensed” person to enter bad data at all.
Screwing home sellers, buyers and making appraisal work “Silly” to have to keep correcting another professionals mistakes/Zestimates.
Hey, lets not forget the realtor who never looked at what the house NEXT door sold for. Or the one behind it, or down the street.All they want is the listing !!!And we want them to do a better job with GLA’s ….lol