I suppose I should specify what I am talking about … in this case I’m referring to living space, square footage, or as appraisers refer to it, Gross Living Area (GLA). In my 15 years of appraising, one constant I’ve always found is there are endless opinions of what constitutes living space. Just last week I had a homeowner tell me her covered sidewalk was now being taxed as “living space” so it should be included in the living area of her home. I had to explain to her that there can be many types of living space, GLA, outdoor living space, guest living space, etc. And while these spaces MAY contribute to market value of a home, the main living area of the home is referred to as Gross Living Area and would not include the covered sidewalk space.
There are many different ways and standards on how to measure the GLA of a home. There are industry professional standards American Measurement Standard (AMS) and American National Standards Institute (ANSI). Most appraisers rely on their experience and how they were taught by their mentor. All of these methods and standards should come to a similar conclusion on what to value as living space of a home. The Dictionary of Real Estate Appraisal, 5th ed. defines GLA as the total area of finished, above grade residential space; calculated by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space. I’d add that all living space must be accessible through the interior of the home. This concept may seem very simple but there are so many what if’s. I’ll cover a few different types of potential living areas.
Guest units are also known as granny units, guest quarters and accessory dwelling units. They can be attached or detached from the home; some have kitchens, some do not. If the guest unit is not accessible through the interior of the main home (such as through a hallway), this area is not considered GLA. It is extremely common for this area to be included in the reported in square footage on MLS or sometimes county records, however an appraiser will not include this area in GLA. This area should not be included in the reported square footage on MLS. I’d highly suggest to be clear in the property description the area is not included and estimate the area of the guest unit.
Barns and Workshops
Barns and workshops are typically detached from the home and may have some sort of living space above. Again this area is typically not accessible through the interior of the home and would not be considered GLA.
Enclosed Patios and Sunrooms
Enclosed patios and sunrooms typically are not heated and would not be considered part of GLA. If this area was heated was finished in a similar quality to the rest of the home, it could potentially be part of GLA.
Finished Basements and Attics
There aren’t too many true basements in Nevada County. Occasionally I’ll run into one in a Victorian home in downtown Grass Valley or Nevada City. A basement is considered a room below grade (ground level) and can be finished or unfinished. Basements are reported as area below grade and not as GLA. We also don’t see finished attics in Nevada County. I don’t think I’ve ever run across one if my career. Finished attics are not considered GLA
A-Frame Homes and Pitched Walls
In some areas an A-Frame house will have a second floor that extends to the roof. For rooms with pitched walls the minimum ceiling height for the area to be counted as GLA is 7ft (in the center). All area that have at least 5ft of ceiling height would be valued as GLA. (Check out my friend Ryan Lundquist’s blog post here http://sacramentoappraisalblog.com/2012/07/10/how-low-can-a-ceiling-be-before-its-not-considered-square-footage/ )
What I call ... 'Lower Levels'
Being located in the foothills it is extremely common to enter homes on the street level and have the home extend down to a lower level along the slope of the land. In fact, my own home has this design. Technically if more than 1 ft is below grade on any side of the home, that entire floor is considered below grade (per ANSI). In the Nevada County market these lower levels are typically included in GLA and reported as living area within the local MLS. Most buyers perceive this type of area as living space. The Dictionary of Real Estate Appraisal’s definition of GLA states that ‘local practices may differ.’ The FNMA selling even specifically states “For example, a property built into the side of a hill where the lower level is significantly out of ground, the interior finish is equal throughout the house, and the flow and function of the layout is accepted by the local market, may require the gross living area to include both levels.” I almost always include the lower level of a home in the GLA as long as there is interior access, is heated and was constructed with similar quality as the rest of the home.
What really matters … valuation
When it comes down to the market value of a home the appraiser is really trying to determine the markets’ reaction to individual categories or features such as site size, view, quality, condition, GLA, guest units, basements, barns, etc. This market reaction is dependent on the comparables found on MLS and the accuracy of the data entered for such features. Its important to compare apples to apples, GLA to GLA and guest units to guest units.
If a home has multiple types of areas its best to report the GLA as living space and then breakdown any additional areas in the property description. Pricing a home works the same way. A buyer for a 2,200 sf home that has a 1,000 sf guest house is going to be willing to pay for a 2,200 sf home with a guest house. This number typically isn’t the same as a buyer that is willing to pay for a 3,200 sf home. There is some typically some diminishing returns to scale for the other living area. That’s why it’s imperative to advertise the home correctly in the MLS listing.
Measuring a home can be simple, but also can throw some curveballs. Most local appraisers would be glad to come measure a home for a minimal charge. If you ever have any questions about areas of a home and how they might be ‘counted’ call or text me at 530-632-3428 or email me at email@example.com.