I was asked a great question by an agent this week that I thought I would share with you. Before we get into that though I would like to let you know that I am available to answer any appraisal related questions you may have. I can be called, emailed, or you can even text me. If I don’t know the answer right away I will find it and get back with you. I might even write a blog post about it, because I know that if one person has a question then others may too.
So the question that the agent asked was this, “If an older home has permanent stairs to attic space that’s been finished with good headroom that includes a bedroom/closet/bathroom, do you include the square footage in your appraisal of the home”? The criteria for what can and cannot be included in the finished area total is set forth by the American National Standards Institute through what is known as the ANSI Standard. There are several criteria that must be met in order for this area to be included. The first criteria is that at least half of the finished square footage must be 7 feet where the ceiling slopes and those areas less than 5 feet are not counted in the finished area. Here’s a picture to help you understand it.
These are the rules for how the area is calculated, however the quality of finish is also studied. The quality of finish should be similar to the rest of the house so that the area is functionally usable in addition to being heated and cooled. Homeowners sometimes like to do the work themselves in order to save money and if they have the skills to pull this off so that the addition is similar to the rest of the home this works out fine, however if they lack the knowledge it could have a negative impact on the property and the additional area may not get counted as much, if it is counted at all.
The last thing I would like to discuss is the topic of permitting. Appraisers are not required to check whether an addition is legally permitted unless the client specifically ask’s for it, however we are required to include pictures of every room. If there are signs in these pictures that the addition has inferior quality of construction or workmanship then they may ask us to verify if it was permitted. If it was not permitted this could result in a loan not being made, so it is important that proper permits be obtained. Have you had any experience with a similar situation? What was it and how did it turn out? Would you have any other questions I might be able to answer?