Sunday, December 3, 2023 | The Latest Buzz for the Appraisal Industry

Just How Big is that House?

Appraising compliance with the American National Standard for Single-Family Residential Buildings

Fannie Mae has released further clarification on their announcement that they will be requiring appraisers to provide square footage calculations in accordance with the American National Standard for Single-Family Residential Buildings, the standard reference is ANSI Z765-2021. The FNMA requirement will take effect April 1, 2022. As of this writing, Freddie Mac, HUD nor the Veterans Administration have not released a statement if they will be requiring adherence to ANSI Z765-2021.

The written ANSI standard is organized as follows: 1) Scope and Purpose; 2) Definitions; 3) Calculations of Square Footage; and 4) Statement of Finished Square Footage.

There are subsections that pertain to both Calculations of Square Footage and Statement of Finished Square Footage. The standard contains detailed requirements for methods of calculation (exterior dimensions), application for detached dwellings, applications for attached dwellings, application when finished areas are adjacent to unfinished areas, openings to the floor below, above and below grade finished areas and ceiling height requirements. Additionally, the publication addresses garages, unfinished areas, protrusions, and how those areas are to be managed when applying the standard, and cites when reporting declarations are required for rounding, the reporting of above- and below-grade areas, areas not considered finished square footage, interior spaces not inspected method, plans-based method, and other methods.

Appraiser Responsibility

When an appraisal is prepared for a lender, in association with a mortgage application that may be eligible for sale to FNMA, the appraiser will be required to calculate and report measurements of square footage calculations in accordance with the ANSI standard. The measurement standard will need to be incorporated in the appraiser’s scope of work and reporting requirements for the assignment. The Fannie Mae announcement does state that exceptions are permitted, provided the appraiser reports accordingly, and provides an explanation as to why they were unable to comply such as if the appraiser is performing an appraisal in a state that requires adherence to a different measuring standard. It is interesting to note that no other examples of exceptions were provided. It is implied that an appraiser choosing not to adhere as a personal choice or preference would not be an acceptable reason for an exception.

Field-Work Implications

The standard does not prescribe what method of obtaining measurements is required. The ANSI standard does however require measurements to the nearest inch or tenth of a foot when using English measurements (the common unit of measurement here in the United States). The appraiser’s duty of care is to present factual information about the property that they are appraising. This duty of care is governed by the Uniform Standards of Professional Appraisal Practice (USPAP). How the appraiser obtains their measurements is often dictated by the circumstances that present themselves when in the field. Technology usage will vary by practitioners and by circumstance. Accurate building measurements at times can be difficult to obtain due to factors that impede access, but the appraiser has a wide variety of tools to assist when obtaining field measurements. These technology tools may include:

  • Tape measures or other standardized physical measuring devices
  • Laser measuring tools
  • LIDAR (light detection and ranging) devices

Additionally, appraisers in practice often rely on mathematical calculations (i.e. abstraction, extrapolation, triangulation, parallax etc.) to assist with presenting accurate measurement representations.

By adopting the ANSI standard, FNMA is requiring a standardized approach to the collection and reporting of data. While some appraisers exist in an operating environment that incorporates the ANSI standards into their practice as a result of client requirements or individual preference, for many appraisers this will be a new step in how they collect their field measurements to a level of accuracy that may not be in existence today, and to report on their calculations and ANSI standard conclusions.

What to do Now – Assess Your Risk

If you have not already done so, purchase a copy of the ANSI standard. Review the methods on how you develop and record field measurements to ensure you are obtaining the required information to properly calculate and report when completing your appraisal assignments. Seek education. The Fannie Mae selling guide is a great resource. Research your state appraisal requirements to see if your state has a different measurement standard. Check with your clients to see if they will be updating their appraisal requirements. As the old risk management saying goes, “an ounce of prevention is worth a pound of cure,” and in the world of appraisal, those pounds of cure can add up fast.

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