What is gross living area in an appraisal?

What’s the big deal with gross living area?

There is a direct correlation between the amount of gross living area in your home and its market value. If everything else is the same, a home with greater square footage (gross living area) will typically be worth more.

During an appraisal, the appraiser will take measurements from your home in order to calculate all of the areas. These areas consist of porches, patios, garages, main level living areas, outbuildings, and basement areas if they are present. Generally speaking, main level living areas, also known as gross living area, contributes the most to value.

Here is a definition for gross living area:

The total area of finished and above-grade residential space; the standard of measurement used for determining the amount of space in residential properties.

Gross living area vs. other areas

Since gross living area contributes the most to the value I thought I would share with you what constitutes gross living area so if you are remodeling your home you can make informed decisions as to where you want to put your money. It would be smarter to invest in your home with the areas that will bring the most value and return on your investment.

The current standard for measuring gross living area is ANSI Z765. ANSI stands for American National Standards Institute. It was developed so that the various individuals and organizations that measure square footage estimates would have a common way of classifying the different areas in a house. For appraisers, it helps us to correctly identify the various areas of a house so that we can compare apples to apples in an appraisal.

If one appraiser lumped all of the heated and cooled space together and called that gross living area but another appraiser split out the area in the basement then it would not allow for a consistent valuation. The price per square foot statistic that we are all familiar with would not provide any useful basis of comparison unless it is calculated in a consistent way.

The good thing about a measurement standard is that anyone can use it and it’s possible to obtainbirmingham house measuring accurate and reproducible measurements of square footage. This means that if 5 people measure the same house they should get approximately the same value. Notice I said “approximately” and not identical? Keep in mind that since we are all human, and we do make mistakes, the area calculations may not be identical. Some people may round up or down so there may be slight variations, however, they should be similar within reason.

The ANSI Z765 Standard

I highly recommend reading the guidelines outlined in ANSI Z765 (which you can download here) so that you will become more familiar with the different classifications of the area of a home, however for purposes of this article I will cover the main areas.

The gross living area consists of all areas of a house that are above grade, heated and cooled, and that are connected to the main body of the house by other finished areas such as hallways or stairways. If there is an area that is finished and heated and cooled but not connected to the main body of the house then it could not be included in the gross living area. An example of this would be a garage apartment where you must go through the unfinished garage to get to it.

There are ceiling height requirements also that I wrote about when discussing finished attic rooms. This rule applies to any room and states that at least half of the finished square footage must have a ceiling height of 7 feet where the ceiling slopes and those areas less than 5 feet are not counted in the finished area.

Areas of a house that are not included in the gross living area, in addition to garage apartments that I mentioned about, are below grade basement, openings such as a two story foyer, porches that are not enclosed or suitable for year round living, patios, garages, and any outbuildings, whether finished or not.

An area that I get asked about a lot is basements and why the finished area is not included in the gross living area. As stated previously, if the area is below grade it is considered basement which cannot be included in the gross living area. Below grade means that if any area on the level in question is below the ground then that level is considered below grade and included in the basement calculations.

Another area that can be confusing is the opening for stairwells. If the opening is the same size as the stairs then it is included in the total grossing living area, however, if the opening is larger than the stairs then only the area the size of the stairs is included.

Conclusion

I hope this discussion about gross living area has helped you understand what areas are included and what areas are not. For agents, this is very important to know because they price their listings primarily on the amount of gross living area. It is important that you have the most accurate information about the square footage in a home, however, keep in mind that price per square foot is not the holy grail of value. If you have any questions about this feel free to contact me.

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Comments

  1. Thank you for the detailed writeup Tom! I am thankful to live in an area without basements, though we do get the occasional finished attic.

    • Thanks, Kevin. I use to live in an area where basements were not common but after moving to my current location I had to learn about basements and how the market reacts to them.

  2. Marc Jolicoeur says:

    Tom,

    I have two three-level side by side townhome where there is a two-car garage with a recreation room on the first level on grade, and the main living/kitchen/dining/deck is a set of stairs above the garage and the rec room and there is a third story on top of that.

    I have had appraisers call the rec room behind the garage as a “basement” and not getting it included in the GLA and therefore does not get the full value per sq ft finished. It is finished with the same quality and finishes as the upstairs. In one of my townhomes there is a nice bathroom in that lower level too.

    Realtors in the neighborhood are for certain counting all of that space in their listings but the treatment by appraisers seems inconsistent.

    Does the ANSI standard suggest this treatment? Or is this a local custom or appraiser error?

    • ANSI states that if any part of a floor is below the ground then it is counted as a basement area. I have also seen real estate agents lump all of the finished areas together, however, for purposes of the appraisal they have to be segregated. I think agents do it to communicate the amount of heated and cooled space the property has. When we talk about “full value” we have to be careful how that phrase is used. Typically a basement area will not contribute as much value as does the main level area, however, it does contribute value. The full value of the basement will be measured the most accurate when the subject property is compared to other like properties. If the comps used are similar townhome units with similar types of basement then the appraisal will reflect the full contributory value of the basement.

    • Nicholas Pietropaolo says:

      Marc, I disagree 100% with the opinion of your appraiser. You stated that the rec room behind the garage is ground level, same as your garage, not below grade and is finished to the same quality level as the remaining living space. That space is no different than a ranch built on a slab so it should have similar value as the rest of the home.
      Also, a very important point is that the physical barrier between the garage and rec room must be constructed to meet all fire and safety codes to be considered living space.

  3. David Benner says:

    I know you are a busy man and I do not expect a reply. Your topic today has hit a nerve and I can’t keep myself from commenting. In Knoxville and probably Birmingham many houses have walk-out basements. Would an appraiser consider that below grade space? We just sold a house that we had extensively remodeled. The basement was air conditioned and wide open to the rest of the house. By that I mean the stairs to the basement were not sealed off behind a door, but were permanently open making the downstairs part of the entire living space, not a dank and dreary place smelling of cat liter and wet dog. The downstairs was finished with the same quality materials as the upstairs. The walk-out was to a large and sunny circular flagstone patio looking out on 8 acres of woods. We had it appraised in preparation for putting it on the market. The nutcase appraiser our bank recommended to us valued the basement at 50% of the value of the upstairs. His explanation was “that is just the way it is done.” That is pretty much your explanation given above. He also used some inappropriate comparison houses. In that regard I learned from your previous posting he was totally wrong in his selection of the houses to compare. Also he did not acknowledge in any way the renewal of the house by extensive remodeling. His appraisal was about 240,000. Our real estate agent thought the appraiser hung to moon and wanted to use his numbers. I should have changed agents immediately but my wife and I felt an obligation to her because we have known her for 30 years and had called on her for free real estate advice over the years. As a concession to my insistence that the house was worth more than 240,000, she said she would put it on the market for 260,000 and we could lower the price after couple of weeks with no offers. I told her i would work on my own appraisal of the house and we would talk again about how to price it. Using my recollection of a real estate appraisal class I took when an undergraduate at UT in the 1960s, a book I bought on real estate appraisals, and most importantly everything I could find written by you, I did my own appraisal. I thought the house was worth 300,000 and we priced it at 299,000. We listed it with our agent beginning on a Friday. By the next Wednesday we had 3 offers. They bid against each other a little and when someone said 325,000, we took it. So, with your help I think I arrived at a correct value and sold the house at the highest price we could have obtained under the best of circumstances. Thank you. (You need to work on this below grade nonsense. Just because it has always been done the way you describe does not mean it has to continue that way. It must come from a time when basements were root cellars. You could be the guy to set a new standard.)
    Here is the house we sold. https://www.zillow.com/homedetails/2510-Lakemoor-Dr-Knoxville-TN-37920/41680621_zpid/

    • Thanks for your comments and questions, David. We have walk out basements as well and since part of that level is below ground then yes it would be considered below grade and be considered basement. When choosing comparables for the property it is important to attempt to locate and use homes with similar basements. Sometimes this is possible and sometimes it is not. Appraising is not an exact science with specific adjustments for specific attributes so a lot of the time we have to analyze sales in each area we work. Another way to determine market reactions to certain features (such as your walk-out basment) is to talk with real estate agents to see what buyers are talking about and what they like and find value in. Agents communicate with buyers and sellers more than we do so their comments can be helpful. I think the concern with how below grade area is classified as basement is not warranted. You will get maximum consideration for the basement area if the correct sales are utilized because those sales will reflect the value of the basement, and the entire house for that matter, as reflected in their sale price. If a sale with a different type of basement is used then the true market value of your home may not be accurate if the walk out basement is considered more desirable. They say that 90% of an appraisal is picking the right comps. I am glad you were successful in pricing your home and the sale going through. Obviously, there were some sales that had occurred that supported your assumption. By the way, I looked at your house on Zillow and have to say it is very nice.

  4. Important stuff Tom. It’s easy to include other areas such as unfinished enclosed patios, sun rooms, and detached structures, but we have to know how the rules work. Otherwise it’s really easy to miss value.

    • Agreed, Ryan. There is so much misunderstanding by owners and agents about the different types of areas in a house. Although most people want to lump all of the heated and cooled living space in a house together, regardless of where it is, that is not always the right path to take. Below grade areas must be classified as such and then compared to the sales on an apples to apples comparison. When done in this way we will get the most accurate value indication.

  5. Mike Robertson says:

    Good article Tom. Thanks for the plug on stairways. Am I right that the simple stairway square footage is only counted once ? So, my 1st floor square footage may include the stairway, but then my 2nd floor square footage should exclude it ?

    • Thanks, Mike. Actually, you will be able to count it on the main level and the second level. Keep in mind, like I mentioned, that only the area of the stair treads will be counted and not any “open air” area.

    • Mike, it depends on what standard is used in your locality. If ANSI is the standard, then Tom is correct. If AMS is the standard, then you’re correct. Find out what standard is the custom in your market and go with it.

      • Thanks for the clarification, Gary. In my area ANSI is used and I am not familiar with AMS. I would call a local appraiser to see if they could tell you what the standard in your area is.

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