Gross Living Area and the ANSI Standard – Agents Advantage Real Estate Academy

Of the figures in a CMA, gross living area is frequently misstated, and an error in it is carried into every size comparison that follows. It is worth knowing what the figure means, how it is measured, and why the number on the tax card, the number in the MLS, and a measured figure can differ.

Gross living area is the finished, above-grade, heated living area of a residence, accessible from the interior of the house and meeting local building code. That is the definition used throughout residential lending, and it is the definition an office uses, because every comparison of the subject to a sale is made on that basis.

Fannie Mae has required gross living area to be measured under the ANSI Z765 standard for appraisals with an interior and exterior inspection and an effective date on or after April 1, 2022. The ANSI standard and the appraisal report call this area finished area above grade; this course uses the more familiar term, gross living area. The standard fixes how the measurement is taken: from the exterior of the house, with finished area counted only where the ceiling is at least seven feet high (with limited allowances under sloped ceilings), and with any level below grade excluded in its entirety, however finished it is. The practical result is that a finished basement, a finished walk-out lower level, and the finished room over a garage that is reached only through the garage are not gross living area, whatever they cost to finish. They may add to the price, and they are accounted for separately; they are not part of the size comparison.

What the standard specifies. A handful of rules in the standard settle most of the measurement questions that arise in Connecticut housing. A level is below grade if any portion of its walls is below the ground, so the lower level of a raised ranch or a split-level, with windows at eye height and a family room finished to the same standard as the rooms upstairs, is excluded from gross living area. Under a sloped ceiling, area is counted only where the ceiling is at least five feet high, and at least half of the area counted on that level must reach seven feet. A staircase is counted on the level from which it descends. An opening to the floor below, such as a two-story foyer or a family room open to the second floor, is not counted on the upper level, although the house may look larger than its figure. Measurements are taken to the nearest inch or tenth of a foot, and the total is reported to the nearest whole square foot.

Where the standard applies. The standard governs detached and attached single-family houses, including townhouse-style condominium units. Apartment-style condominium units, cooperative units and two- to four-unit buildings are reported by other conventions, commonly the interior area shown in the assessor’s record or the project documents for a condominium unit, and the area of each unit for a multi-family building. For those properties, the record states which convention was used, and the same convention is generally used for the subject and for each sale, because a comparison across conventions carries the same flaw as a comparison across sources.

Two Connecticut examples. A Cape Cod has a first floor of 1,000 square feet measured from the exterior. The second floor sits under the roof slope behind knee walls. Of the 1,000-square-foot footprint upstairs, 700 square feet has a ceiling height of at least five feet, and 420 square feet of that reaches seven feet. Because 420 is 60 percent of 700, the level meets the requirement that at least half the counted area reach seven feet, and the 700 square feet counts. Gross living area is 1,700 square feet. The assessor’s card, which carries the second floor as a half story, shows 1,500; the MLS entry, copied from an earlier listing that counted the full upstairs footprint, shows 2,000. The three figures span 500 square feet for one house.

A raised ranch has an upper level of 1,150 square feet over a lower level containing a one-car garage and a 550-square-foot finished family room. Every wall of the lower level is partly below grade. Gross living area is 1,150 square feet, and the 550 square feet is finished below-grade area, recorded on its own line. A listing that describes the house as 1,700 square feet places it beside a 1,700-square-foot colonial with all of its area above grade, although sales may show a different price for the two.

What the error does to the range. A subject is recorded at 2,400 square feet from its MLS history; it has 1,900 square feet above grade and a 500-square-foot finished basement. A comparable with 2,000 square feet above grade and an unfinished basement sold for $520,000. Treated as 2,400 square feet, the subject is 400 square feet larger than the sale, and at a market-supported size adjustment of $60 per square foot the sale is adjusted upward $24,000, to $544,000. Taken at its above-grade area of 1,900 square feet, the subject is 100 square feet smaller than the sale, a downward adjustment of $6,000, and its finished basement, which paired sales in this market show contributing about $15,000, is a separate upward adjustment. The sale indicates $529,000. The difference is $15,000 on one comparable, and because the misstatement is in the subject, it moves every sale in the grid the same way and the whole range sits about $15,000 high.

The figures available in practice come from different places. The assessor’s card may count finished basement area, may be decades old, and may or may not reflect an addition. The MLS entry is typed by an agent, sometimes from the card, sometimes from a builder’s plan, sometimes from the seller. Builder plans or a prior appraisal may also be available. Gross living area for the subject and each comparable is generally taken from the best available record (the assessor’s card, the public record, the MLS listing, builder plans or a prior appraisal), with the source noted. Where sources disagree, and they can disagree by several hundred square feet, as the Cape example shows, the difference is noted, not guessed at; a CMA that uses a figure without knowing what it includes may compare properties of different sizes without knowing it. The ANSI standard is taught so the agent knows how the appraiser measures and why the appraiser’s figure may differ from the record.

Checking each source. The assessor’s field card in Connecticut carries a sketch with exterior dimensions and a breakdown of area by level. The sketch shows whether a lower level or an attic room has been counted as living area, and it is compared with the building department’s permit file for any addition or finished space completed since the card was last updated. Finished area without a permit is recorded as built, with the permit status noted, because a buyer, a lender or the town may ask about it. The MLS figure for a comparable is checked against that comparable’s card; where the two differ by more than a room’s worth, the card’s sketch usually shows why. For the subject, the listing appointment is the opportunity to compare the record with the house: a lower level, an addition or a finished attic room that the card does not show, or shows differently, is noted with the source of each figure before it reaches the listing or any comparison.

How it applies. The office standard is to take gross living area for the subject and for each comparable from the best available record, to note that source, to note any difference between sources rather than guess at it, and to keep finished below-grade area on its own line. Where a comparable’s MLS figure is the only figure available, that is noted. A seller who has been told the house is 2,400 square feet, and whose listing agent has priced it as 2,400 square feet, may face a difficult conversation if the appraisal reports 1,900 above grade and 500 below; a listing agent who knew the distinction at the listing appointment can address it before the price is set.