In April Fannie Mae, a primary investor in residential mortgages for single family homes and townhouses, changed the rules on how appraisers should measure, calculate and report on the gross living area of your home (GLA) and non GLA areas. A non GLA area is now any ceiling height less than seven feet. For example, if a home has a finished ceiling height of seven feet for 50% or less of the gross living area, this feature will now need to be identified in a second grid of an appraisal and with appropriate market adjustments. A home being appraised for a Fannie Mae loan must now be measured to the nearest tenth of an inch or one tenth of a foot. Single family and townhouses are measured inclusive of exterior walls. If the original plan does not have that amount of detail, there will be a lot of stomping around in icebugs around foundations during the middle of winter. And, finally, the total l square footage is to be reported to the nearest square foot on the appraisal form.
Another recent adjustment has to do with how stairs are measured. This may actually be a benefit to you. Traditionally, stairs are only measured on the first floor, including the under the stairs area footage frequently used for a coat closet, pantry or Harry Potter hideaway. In townhouses, it’s also a popular hideaway for a powder room or washer/dryer. Now, according to the new rules, an appraiser can also count the stair treads going to the second floor as additional square footage. Basements have long been considered inexpensive square footage because they utilize the four foot foundation walls that are either poured concrete or block. For marketing purposes, basements fall into three categories. A full basement with window wells for egress is considered the least desirable. A daylight basement which has egress windows placed on top of the four foot foundation has better value than the full basement. The most popular and considered the most valuable is the walk-out lower level which has easy access to the backyard. Now, Fannie has determined that any lower level aka basement that is even partially below grade will not be considered at the same price per square foot as a two-story home that is totally above grade.
These new Fannie changes do not apply to condominiums and apartment style units which are still measured interior paint to paint. However, keep in mind that the square footage of a single family home and town house include the six inch exterior wall space and so your liveable square footage is always smaller.
The idea behind these changes is to create consistency and conformity in valuing properties. Unfortunately, not all appraisers , like in most professions, have members that follow the rules and those that are not as well informed as their peers. All appraisers are licensed in the state of Alaska and all belong to the Appraisal Institute which is the equivalent of the National Association of Realtors’ professional organization. Appraisers also belong to the Alaska MLS system which is a statewide organization although most appraisers are located in Anchorage, Chugiak and Eagle River. However, there is also a private organization called the Alaska Market Data Systems (AMDS) which charges a fee to belong. In the fast paced market like we have experienced over the past eighteen months, not all sales are reported in MLS. The AMDS collective so to speak catches more private sales and also provides additional detail on a home’s condition and interior. My advice to lenders and private parties is to use an appraisers who pays a fee to belong to the private system as well as the Alaska MLS to make sure they have access to as much data as possible.
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