Great lesson for all of us in the Real Estate world “The written word prevails” I include the basis for my measurements on the drawing and the report.

Scott,

It shouldn’t be included in GLA for two primary reasons: there is a section on page one of the URAR specifically for basements. Two, there’s a section on page one specifically for basements BECAUSE it shouldn’t be rolled into the GLA.

Basements usually have inferior utility and level-of-finish than the rest of the house. Don’t think like a real-estate salesman! Think like an appraiser!

Sharing sketches WOULD be helpful. Not to save me time measuring, but to identify discrepancies in the field in order to double check them and confirm why they appear to exist.

Sadly, ALL the article’s author had to do is advise agents to HONESTLY report living area in accordance with lender rules AND local ordinances concerning basements, stories, and mezzanines.

Clearly the area in photo-left is superior to that in photos-right. It SHOULD contribute more than the one on the right (assuming local market acceptance). How much more depends on the market as well as the quality of the rest of the house.

Scott, short answer is that it CAN, but the bigger question is should it be?

My personal opinion is “No. It should not be.” Not unless it is universally adopted by NAR and ALL state Boards; and in turn by TAF and FNMA as well as HUD and VA all simultaneously. We cannot have ‘mixed’ standards with some adhering to ANSI; AMS or other more arbitrary ‘standards’ expressed by FNMA and other GSEs.

Right or wrong, buyers DO make offers based on perceived prices per sf of living area. Listing prices are automatically converted to asking prices per sf of GLA. (Some say GBA which just confuses things more). When courts do find in favor of a party over a GLA dispute, they typically calculate an overall price of ‘value’ per sf. Again, right or wrong – that’s the reality.

A 1,500 sf sfr listed for $500,000 is $333.34 per sf. ASKING price per sf. IF it had a 1,000 sf basement that were also included AS CALCULATED LIVING AREA it would be only $200 sf.

The same total area house (2,500 sf) with a 1,250 sf living area and a 1,250 basement called living area at $500k is $400 per sf (living area) and $200 sf if overall living area and basement is all considered the same.

(IF) 90% of all area agents honestly reported sf then the rate for a 1,500 sf house (all else being equal) would be around $333 sf in most buyers eyes. They see a listing for only $300 per sf (its a “2,000 sf” property) or $600,000. In actuality it’s only 1,000 gla and 1,000 finished basement. It will appear to be a ‘better deal’ measured per sf than the first example. Yet it is more than $100,000 over priced.

What we include as ‘living area’ isn’t as important as that it must be universal and it must be honestly reported. I have adjusted basements fully as much as GLA in some instances; and in others adjusted them far less.

IF a basement truly is finished to the same quality and condition as upper living areas with equal or even superior utility, then the market may well recognize its value per sf as the same as overall living area. Though I submit that is NOT USUALLY the exact case. It’s often the claim, but the reality is a lower quality normally exists.

In CA, I encounter (subject) basements about 5 times a year, and often deal with agents who have never sold a home with a basement in their entire career. Its a loaded subject, as in if the agents, owners, & buyers don’t know, thus they are not well advised, or informed (in part definition of market value), how can they determine an asking price or make an offer.

Seek the truth.

Its below grade. Its considered finished basement area.

Why can’t a basement be included in GLA? Short article by REALTOR.com. Seems to me it’s more about local custom than a clear and fast single rule.

https://www.realtor.com/advice/buy/should-a-nicely-finished-basement-count-in-the-pricesquare-footage-of-a-home/

Seek the truth.

This was permitted as “livable” sq.ft.” along with room extensions. the premise of the story.

Enclosed porches are not calculated as GLA.

Hi Jimbob-Great information.

I note that they are for Office Buildings only (per their advertising)

In looking at their sponsors I also see duplication of all those also purported to have signed on to IVSC. Absent from the above members is The Appraisal Foundation-though AI is listed. Im assuming this is an extension of the rift between AI and TAF.

The mere fact that there are two international organizations making the same or very similar claims is a concern. On the other hand IVSC concerns itself with all aspects of standards for international finance and accounting/valuation as opposed to simply measuring buildings, so maybe the seemingly apparent conflict isn’t that big a deal.

Your post is related to office buildings. The bulk of posts above referred to residential 1-4 unit dwellings I believe. Again, good info for all and worth spending some time on.

The International Property Measurement Standards initiative got off the ground at a meeting in Washington DC in 2013. It’s supported by most of the major standard-setting organisations throughout the world, not to mention the major real estate service providers and clients.

Unfortunately, you (we) have all been undermined by FNMA AND increasingly ‘local custom.’ Please read Horiike V. Coldwell Banker (& Chris Cortanza as agent [sp]). It’s a multi million dollar case that has been around for about 10 years; went to the California State Appellate Court and then was sent back down to superior court.

In a nutshell; City of Malibu AND the builders plans specified GLA as approx. 10,000+ sf (closer to 11k sf) with an additional 4-5k sf “lower level” below grade on three sides (you and I would call it basement) but finished to a quality similar to the rest of the luxury estate. TOUGH house to measure. Appraisers were about 500 sf apart.

Agent listed the property as 15,000 gla. Asking Price per sf appeared much lower to the buyer in the $800 or $900’s per sf vs the prevailing $1,000-$1,200 sf overall for similar property as a result of gla being over stated in mls.

Foreign non English proficient Buyer sued alleging property was misrepresented and he was taken advantage of. (there were some other relatively minor side issues as well).

Almost all appraisers (other than the one testifying for the respondents) would concur that GLA should NOT have included basement area. Especially when the city’s own code excludes it as well. The court disagreed.

Case is on appeal yet again. My point is that as long as FNMA and local jurisdictions re interpret whatever standards appraisers adopt, then consistency in reporting gla becomes next to impossible to achieve.

Additionally, over stating the market importance of sf to the exclusion of other factors like traffic flow tends to make 50 SF much more significant legally than it should be. That’s about one stairwell or ceiling opening. You and I would likely consider it as not an overly important size variance (as opposed to other sources).

Otoh 200 sf becomes much more significant – that’s potentially a moderately large room.

In your state (& presumably others), it’s possible agents are simply afraid of litigation that could arise from a minor misstatement of size or dimensions.

When or if those new standards are developed there has to be a ‘safe harbor’ of some type so that neither agents nor appraisers are sued for minor variance (say 5%+-?). PLEASE keep TAF out of it – they can’t even assure USPAP is uniformly interpreted or enforced. There also MUST be universal concurrence as to what constitutes living area (ANSI apparently is not enough).

Maybe it’s time for new expressions: Primary Living Area (PLA) and Other Livable Areas (OLA), and recognition that they MAY or MAY NOT have the same value in a given market area.

Great article Hamp, and more important than many realize.

Yes, that’s the new deal. Plans are submitted to get things rolling but are often not revised after changes are made. When dealing with newer construction homes we may also need to contact building offices since they also do not always update the assessors. What’s in assessment may only be the initial record. New construction is certainly much more challenging and subjective than it used to be. They’re all fully customized these days, with all the minor details. I miss the silver gold platinum and uniform housing approaches. What’s with this class system, mansions next to townhomes in same neighborhoods.

Seek the truth.

This one item is the main reason no computer program can pop out an accurate OMV. Why? Because the data they utilize for this is so inaccurate, it cannot be relied on. GLA is among the most important items which has a market reaction across the nation. If an accurate account is made in public records using a National Standard, computer programs have half the battle won.

So I say, let it be and rely on the appraiser to accurately measure the subject.

They either trust us, or they don’t.

Seek the truth.