When getting an appraisal, homeowners are often uncertain about what areas of their home would be considered finished area by the appraiser. Recently, I posted a blog and video clarifying what areas an appraiser would consider as GLA (Gross Living Area) and what would be considered basement. To expand on that topic, I decided to clarify the difference between finished and unfinished areas of the home.
In Oregon (and many other states), residential appraisers typically follow ANSI standards when measuring a home. ANSI says that finished area (often referred to by appraisers as GLA) includes area that:
1. Is “…suitable for year-round use.”
2. Is “…similar to the rest of the house” in terms of its level of finish.
3. Is “…connected to the main body of the house by other finished areas such as hallways or stairways.”
4. Is measured from the “…exterior finished surface of the outside walls” (except on condominiums and attached homes).
5. Is a minimum of five feet in ceiling height but, “At least one-half of finished square footage must be 7’-0” where ceiling slopes.”
6. Does not include openings between levels. A two-story foyer would not be included in the measurement of both levels, but the stairway would be included in both levels. The following Portland Home Sketch shows that “Open to Below” has been removed from the area of the Second Floor (only living area is highlighted yellow on the sketch).
These measurement standards mean that a finished sun porch or a finished garage may not meet the standard for finished area by an appraiser. Also a detached finished area, like a mother-in-law apartment or guest house, would not be included in finished area. This does not mean that these areas do not have value. It just means that these areas should be compared differently by the appraiser to determine what the appropriate value is.
Keeping these home measurement standards in mind, an appraiser must also be aware of local customs and imperfect data when estimating the size of a home’s living area. For example, if an appraiser follows ANSI standards to measure the subject home, but the appraiser’s comparable sales are based on a local county assessor data that follows a different standard, then the appraiser would end up with a flawed comparison and possibly an incorrect value opinion.
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A question appraisers are commonly asked is, “Why wasn’t my home’s entire finished area included in the appraisal report?” The answer is that often all of the area was considered, but appraisers regard finished areas partly below grade as basement, even if the area has daylight windows and is mostly above grade.
In the following two photos, you can see an example of a daylight basement that is mostly above grade on the rear of the improvement and mostly below grade on the front. The blue line in the photo represents the approximate grade for the property.
In the Portland area, properties like split-levels (two story bi levels), tri levels, and daylight ranches often have a large portion of finished, partly above grade basement area. The above grade finished area is usually considered as gross livable area (GLA) and is more prominently displayed in the appraisal report. The rest is considered as basement and is more difficult to find in the appraisal report.
The reason for separation of above and below grade area is to ensure that appraisers compare apples to apples. Lumping basement and above grade area together might lead to accurate value estimates in some cases but, for other properties lumping areas together could lead to an inaccurate comparison and value conclusion. Consequently, if it looks like the appraiser measured your home as too small, first check to see if part of your living area is compared in the basement area of the report with other properties that have similar basements. If not, there is usually a home sketch in the report with appraiser measurements that can be used for verification.
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