Solving the ANSI Measuring Dilemma
Appraisers, I was chatting with an appraiser buddy last week about the ANSI measuring dilemma we all face when doing Conventional lending reports, which ultimately will wind up with Fannie Mae.
In my view, my appraiser buddy has a brilliant ‘work around’ to solve the subject & comps adjustment issues, which Fannie Mae thinks is no big deal, but we all know will cause considerable consternation among users of our reports, and with appraisers trying to figure out how to allocate measured and valued spaces properly, per market acceptance.
It’s the mandate that “a” particular measuring method for the subject be used, while the comparables have been ‘measured’ by “who knows what” method. By the way, while I’m on this subject, this only applies to ‘traditional’ appraisal assignments when the APPRAISER is doing the subject inspection. Not with Desktop or Hybrid reports. “How do you like them apples??!”
Appraisers may not know anything about the “who knows what” process was used, but for the most part, we accept that for our assignments because it has uniformity across properties. I’m referring to the local property Assessor’s process for determining and reporting sizes of homes in their taxation records. Or in some cases, it might be the local/regional MLS that keeps those figures. Use your data for your area. The point is, we appraisers generally use acceptable local data for our work, as we compare and ‘adjust’ various properties in our reports.
I’m in agreement that a common Standard should be the proper method used by EVERYONE in the residential realm to calculate the finished and unfinished areas, but we are not there yet. Just because one entity mandates the protocol does not mean that all other people or organizations involved with home building design, assessing and sales will automatically fall in line, especially since they apparently were not consulted about this early on. It will take years before this will happen. And I find it incredibly interesting and revealing that the three other significant “agencies” who are involved with using our reports for mortgage lending HAVE NOT jumped on board the ANSI mandate, as yet.
The problem that many appraisers are concerned about, is our report (used by ONE “agency”) will now be comparing apples to pineapples in terms of Above Grade (GLA) and Below Grade (Basement) figures between the subject and comparables. Reporting various areas that don’t meet the measurement standard for living space, but do have market value, are supposed to be indicated in the report and ‘adjusted’ on the separate lines below “Porch, Patio, Deck” on the form. Incredible confusion likely will occur, and may have already started!
The appraiser who discussed this ‘work around’ with me is a second generation Certified General, who’s been in the appraisal trenches for 20+ years. The appraiser is FHA approved and specializes in appraising unusual, atypical single family residential properties no one else wants to touch, for lending and private assignments. The appraiser has highly developed analytical skills, and thinks through situations carefully to solve the appraisal problem. Here’s the relatively simple ‘work around’ process:
For Conventional lending assignments, measure the subject using the ANSI Z765-2021 protocol, and report your appropriate Above Grade and Below Grade measurements on the GLA and Basement lines in the form. Fill in your comparable sales measurements info that you ‘rely on’ from whatever source you use in the correct form fields, but DO NOT ‘adjust’ those. Enter
Be sure your report contains the necessary ANSI disclosure language so that the report will comply with the Fannie Mae assignment condition, and so that you will comply with USPAP.
Then, and this is the brilliant part, use theto show the ASSESSOR’s or MLS square footage numbers that you would typically ‘rely on’ for adjustment purposes, for the SUBJECT and the comparables. Put your adjustment amounts for each property in the appropriate form fields, across that last line. This works because the subject’s ‘assessment measurement’ will be done similarly to the comparables.
To do this you will have to include additional language in the report explaining your process. Secondly, you may have to build a spreadsheet to contain your adjustments for the Above Grade and Below Grade areas, so that you can use ‘one’ adjustment rather than ‘two’, and include that in the report Addendum, so that readers can see your process.
The last line can have the topic item shown as “Assessor (or MLS) AG/BG Measurement”. Drop the BG if the home does not have a Below Grade basement. Explain what these mean in the report, either on the UAD Abbreviations page, or in your Addendum, or maybe even on the 1004 form page 3 comment section that some appraisers don’t bother to use!
Some appraisers will grumble, saying that those three extra lines are already used. True. You’ll have to combine items on the first two lines for adjustment purposes if that’s the case, in order to implement this brilliant ‘work around.’ Just make a separate spreadsheet, or if you use one brand of software that has a built-in ‘worksheet’ spreadsheet that can transfer numbers in a particular field on the worksheet to the form field, use it.
The other aspect to consider is whether or not to use the Fannie Mae ‘Exception Code’ as the first item on the Additional Features line on form page 1., for the majority of homes you will encounter. The ‘Exception Code’ is meant to be used on the screwball, non-typical homes that the ANSI Standard has severe trouble with in terms of measuring. Use that code only if appropriate.
Please don’t misinterpret what this ‘work around’ process entails. I am in no way suggesting that the ANSI Measuring protocol assignment condition be ignored. All this suggestion does is simplify reporting of data that you are used to using in the way you would normally use it. And it corresponds to data other users already have access to.
There is no requirement in USPAP or in the various ‘Guides’ or ‘Manuals’ that an adjustment must be made just because a line item is shown on the form grid. That’s why putting a ‘Zero’ on the “normal” GLA and Basement adjustment lines works.
This brilliant ‘work around’ process maintains your requirement to produce a “credible” report per USPAP, as long as you provide commentary for the process you use. As a positive note, it probably will help avoid angry phone calls from agents and borrowers (and lenders) who can’t understand the “other” ANSI reporting protocol that Fannie Mae is pushing on us, due to the confusion this will cause and is causing.