Appraisals - What is important to know?

Appraisals! They can be great and they can be a nightmare!  The most important items to know are the basics of how it all works.  

So, what does an appraiser do and what are the guidelines he has to follow?

A definition that is important is - Gross Living Area.  Scott Murphy from the appraisers association stated the article below about living area.  (this helps to understand how square feet are calculated)

Probably one of the most important elements of a home, in terms of value, is the overall living space or gross living area (GLA). It is probably one of the most misunderstood elements as well. There are a number of standards for calculating GLA but the one that is used by appraisers is the “ANSI” – American National Standard Institute. The ANSI standards define "finished area" as “an enclosed area in a house suitable for yearround use, embodying walls, floors, and ceilings that are similar to the rest of the house.” Measurements must be taken to the nearest inch or tenth of a foot, and floor area must be reported to the nearest square foot. Garages are specifically excluded. The way I explain it is that if you put your foot on the floor of any given level and any portion of that floor is below the grade of the ground, it is considered below grade space and CAN NOT be included in GLA. Another way to think of it is that if you could not put a door on any part of the perimeter than it is below grade space. This comes into play in parts of the country where there are homes with basements and other home styles such as split level and split foyer homes where some levels are below the grade of the ground. The appraiser then will take the areas above grade and count the rooms. The appraiser will count the total number of rooms, then the number of bedrooms and then the number of bathrooms. The room count will only include rooms which are above grade; bedrooms and bathrooms below grade will not be included in the room count. Foyers, breakfast areas, laundry rooms and bathrooms are excluded from the total room count. So for example, we might have a typical two story traditional home. The first floor has a foyer, living room, dining room, family room, kitchen, breakfast area, laundry room and a half bathroom. The second floor might have four bedrooms and two full bathrooms. Our total room count is eight (living room, dining room, family room, kitchen and four bedrooms), our bedroom count is four and our bathroom count is two and a half (8-4-2.5). Let’s define a bedroom before we go any further. A bedroom is a room of “adequate size” – which is defined as no less than 100 square feet. It must have a closet, a window, a door; it must be heat/cooled and finished to the same quality as the rest of the house. It must be ABOVE GRADE to be counted as a bedroom. And the most forgotten or unknown factor in defining a bedroom is that it must have ready access to a FULL bathroom. A full bathroom is one which has a shower or a tub as well as sink and toilet. Think about it, if you have a bonus room finished up over a garage; it has a closet, window, door, heated/cooled and finished to the same quality as the rest of the house but you have to go down the stairs and across the house to use the bathroom – that does not function on a long-term basis as a bedroom. Another common scenario is that you might have four “bedrooms” on the second floor of a house. Three of the bedrooms have private baths. How is someone in the fourth bedroom supposed to get to the bathroom? 

So, what does this mean for a homeowner?  It means a couple things.

1. Square feet valued for $ per square feet is valued for square from the front door of the home and above. No finished square feet below 'grade' are included in square feet analysis..  An appraiser cannot use terrace (basement) level in the same way as main and upper square feet.

2. Bedrooms are calculated as a bedroom if they are above grade.

There are several other items in this article (see attached) that are important for each of us if when we are considering selling a home or refinance.

Contact the Stan Jones Team of Keller Williams Realty for more informaiton about appraisals and home valuations. 678.542.1380.

Post a Comment