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|Posted on August 31, 2013 at 5:06 PM|
As published in the Savannah Morning News - 4 August 2013
The Truth About Gross Living Area
When listing a home, I am amused when my clients insist they have more bedrooms than I can count. These “bedrooms” don’t include a closet, or you must pass through the room to get to another room. They argue that when they bought the home, it was advertised that way, and they believed it.
“Not so”, I say, feeling confident that I am backed by appraisers everywhere. When financing is involved, appraisers are all about getting it right. Not only is a lender interested in how many bedrooms you have, but they want to know the true square footage of the home as well. Why? Because when they represent the lender, they don’t want to exaggerate the value, causing the lender to provide an excessive loan amount.
According to D. Scott Murphy, SRA, who writes for the Georgia Real estate Appraisers Board, he believes, in terms of value, that the overall living space, or gross living area (GLA), is one of the most important elements of a home. The American National Standard Institute (ANSI) gives appraisers a number of standards for calculating GLA.
Let’s start with the bedroom argument. According to the standards, a bedroom is defined as a room of “adequate size”, which has no less than 100 square feet, and must have a closet, window and door. It must be heated, cooled and finished to the same quality as the rest of the house. So folks, that walk-in closet (with the hidden closet/storage area inside) may have served as a bedroom, but the appraiser won’t count it.
The most common and unknown factor is that a bedroom must also have ready access to a FULL bath room, with a tub and/or shower, toilet and sink. Think about this: You may have a bonus room over the garage; it has a closet, window, and door, is 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 the long-term basis as a bedroom.
Mr. Murphy states, “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?” He has a point. The most common scenario: “Bedrooms” serviced by a half bath do not function on a long-term basis as a bedroom. In both cases, these rooms are considered a den or office.
Now, let’s consider how gross living area is measured. As Realtors®, we often take the measurement from the county tax records, but occasionally, sellers will tell us they have added rooms to the house, enclosed a garage, or finished a bonus room. If the additional square footage is not included in the tax records, and there aren’t any notations on the records regarding the addition, it strongly suggests to us that there may not have been permits pulled when the work was done.*
When preparing a listing in the Multiple Listing Service, we must choose an option to indicate where we got the square footage information. Most listings reflect the square footage was found in the county tax records, but occasionally we see it was provided from an appraisal or the seller.
Sellers beware. You can be held liable for your information, so be accurate.
Realtors® usually assume areas that are heated and cooled should be included in the GLA. However, ANSI standards define “finished area” as “an enclosed area in a house suitable for year-round use, embodying walls, floors, and ceilings that are similar to the rest of the house.” So, without finished walls or heating and cooling vents, the porch you just enclosed is not going to measure up.
When measuring GLA, 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.
There is also the standard that says if any portion of the floor is below the grade of the ground, it is considered below grade space and CANNOT be included in GLA. Value is given to these below grade spaces; they are just handled separately. All appraisers use the same measurement standards as a basis for determining GLA; however, there may be some local exceptions, so it is important to use a local appraiser.
Misrepresentation by you and/or your Realtor® can have legal repercussions. It is critical that you recognize these factors and determine gross living area correctly, as this forms the foundation for the valuation of the entire property.
*Caution: Square footage added without permits will be counted by the appraiser, and can become an issue with the buyers. Additionally, it can resurface when they resell the house. After closing, buyers sometimes sue sellers when they discover undisclosed, non-permitted improvements. The new owner may suffer damages (they charge back to you) when City or County building inspectors force the owner to pay penalties, remove the addition, or bring the property up to code.
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