Note: All year, we’ll be writing about a variety of frequently asked questions dealing with appraisals. If you’d rather listen, check out our podcast, The Appraisal Cast, wherever you listen to podcasts.
Question: Do ANSI ceiling height requirements apply to below grade square footage?
This question came to be from a Realtor who emailed me at firstname.lastname@example.org.
This particular Realtor was selling a home with a basement, and wanted to know how to measure the basement, specifically. As all of you hopefully are aware by now, Fannie Mae made a sweeping statement that all homes purchased by them must be measured using ANSI standards. This went down in April of 2022 and has caused more than its fair share of trouble.
As many market participants are still learning about ANSI guidelines, I know that many still have questions. And if this Realtor was wondering about ANSI guidelines, then I’m sure some of you are as well.
So here’s how I answered this question:
I told the Realtor that this is a tough question, and here’s why: ANSI doesn’t specifically state whether their guidelines are for above grade or below grade. ANSI simply uses the term ‘square footage’. When discussing ceiling height requirements, there is no mention of main level or upper level (except when discussing knee walls) or basement level, and there is no separate section that deals directly with the basement level, outside of mentioning how we treat below grade levels (i.e. if any portion is below grade, then it’s considered basement).
Therefore, in the absence of any clear direction for or against, it is my opinion that if we are using the term ‘finished square footage’, then no matter the level of the home, we need to follow ANSI guidelines. How I would treat this, then, is first of all disclose, disclose, disclose. If you’re a Realtor, then you should – in your listing documents and MLS listing – tell the reader or buyer or appraiser what you did. What did you count as square footage? Did you depart from ANSI? If so, where? And why?
The Realtor who posed this question to me didn’t indicate how low the ceilings in the basement were. So I’m going to assume they were 6’8″ just for purposes of this article. Remember, the ANSI ceiling height requirement is 7′.
Then, if your market would treat that lower level area no differently than if it had at least 7′ ceilings, then it would certainly command some value, wouldn’t it? If I were appraising that home, I’d state that the lower level didn’t meet ANSI guidelines for finished square footage, but I would add in a separate line item to my sales comparison grid and adjust just as if it were in the ‘basement’ line.
Until we receive clarification from ANSI on this topic, I believe it is best to be consistent. If we’re going to follow ANSI on one level, we need to follow it on all levels. This rarely has any impact on value as there’s always somewhere else the non-ANSI-compliant areas can be valued in an appraisal.
For more information on this and other topics related to the appraisal process, check out our Guide To Appraisals set of E-Books at https://riverfrontappraisals.com/guides/.
And, if you have a question you’d like to have featured on our blog or podcast, email me at email@example.com.
Committed to helping you understand your home’s market value,
Ryan Bays, SRA, AI-RRS