Appraisers are now required to use the Square Footage-Method for Calculating: ANSI Z765-2021 (American National Standards Institute) measuring standard for measuring, calculating and reporting above and below grade square footage(s) to determine gross living area (GLA) and non-GLA areas of subject properties for appraisals requiring interior and exterior inspections with effective dates of April 1, 2022, or later on loans sold to Fannie Mae.
All footprint sketches and floor plans must be computer-generated (not hand-drawn), indicate all the dimensions needed to calculate the above/below grade and finished/unfinished square footage of each level and other areas such as a garage and show the calculations to demonstrate how the square footage was derived.
Recently, Fannie Mae, through its Standardized Property Measuring Guidelines, addressed some frequently asked questions (FAQs) on this subject. The following are just a selected few appraisers should find helpful
Q. Do appraisers need to adopt new technology to comply with the requirement for sketches to be computer generated?
A. Most appraisers already provide computer-generated (not hand drawn) sketches in their reports. Software that creates computer generated floor plans and sketches for appraisal reports is readily available and already in widespread use by appraisers.
Q. The standard describes three scenarios in which a “declaration” is required. What is the difference between the statement of finished sq ft and the declarations?
A. The statement of square footage is the output produced by following the standard (see Q6). The declarations are not the result of following the standard, but rather are explanations of limitations in following the standard for certain exceptional scenarios. The scenarios requiring declarations are exterior-only appraisals, proposed or under-construction appraisals relying on plans rather than physical measurements, or situations where it is physically impossible to measure the home due to factors such as steep terrain. We currently do not allow exterior-only appraisals, so that declaration will not be needed. The second scenario does apply to proposed/under construction appraisals. For the last scenario, the appraiser may need to use the opt out code “GXX001-”.
Q. What should the appraiser do if compliance with the ANSI standard is not possible?
A. If the appraiser is unable to adhere to the ANSI standard, they must enter “GXX001-” at the beginning of the Additional Features field of the appraisal report and provide an explanation of why they were not able to comply. For example, if the appraiser is performing an appraisal in a state that requires appraisers to adhere to a different measuring standard, the appraiser may use the exception code and the loan may still be eligible for purchase by Fannie Mae. See the Gross Living Area section of Selling Guide B4-1.3- 05, Improvements Section of the Appraisal Report for more information.
Q. Is the ANSI standard required for desktop appraisals?
A. No. The standard is not required for desktop appraisals, nor is the exception code. We do encourage appraisers to voluntarily follow the standard on desktop appraisal assignments whenever feasible.
Q. Will appraiser adherence to the ANSI standard cause confusion when the subject GLA differs from other sources such as MLS or public record?
A. GLA from appraisal reports is already often different from other sources. It is common practice to treat some finished areas separately from GLA due to low ceilings, inferior quality, below-grade walls, or separation from the main living area. Many factors such as variability in definitions, methodologies, or precision of execution can exacerbate differences. The benefit of adherence to the standard is that it enables appraisers to explain how above- and below-grade areas are derived in consistent, professional terms. This will result in more clarity for consumers of appraisal reports. It will also enable lenders, real estate agents, and other participants in the transaction to better anticipate appraisal outcomes, which can help reduce loan closing issues.
Q. How should appraisers account for rooms located in above-grade finished areas that do not meet ANSI standard minimums?
A. While the ANSI standard is not definitive on this point, appraisers should include rooms located in above-grade finished non-GLA areas in the room counts (Total Rooms, Bedrooms, Bath(s)) in the Improvement section and in the Sales Comparison Approach grid of the appraisal report to comply with Uniform Appraisal Dataset requirements.
Q. How should appraisers value finished areas that do not meet the ANSI standard ceiling height requirements for finished square footage?
A. The Selling Guide offers some guidance on this topic. When the subject property has an area that does not meet the ANSI minimum ceiling height requirements, the additional square footage must be reported on a separate line in the adjustment grid and a market adjustment applied, if warranted. Similarly, we require the appraisal report to account for all other square footage that is not included in the GLA. Our longstanding policy on adjustment rates has not changed – we require appraisal adjustments to reflect market reaction. This is explained in the Analysis of Adjustments section of Selling Guide B4-1.3-09, Adjustments to Comparable Sales: “The expectation is for the appraiser to analyze the market for competitive properties and provide appropriate market-based adjustments...” It is up to the appraiser to determine the market reaction for non-GLA areas, which may be greater than, less than, or equal to that of the GLA. Reminder: Fannie Mae does not have restrictions on gross, net, or line-item adjustments.