Calculating Building Size
Dart Appraisal’s experienced appraisal review team routinely review a variety of unique commercial and residential appraisal reports. The licensed appraisal review team, with over 20 years’ experience, have seen appraisals on almost every property type. Often clients or appraisers will ask for opinions about building size; they may have concerns about the property being measured correctly or they may not be familiar with what area is included in the calculations provided. Dart’s goal is to help answer some questions frequently asked regarding building size and provide some explanations of industry acronyms.
The American Nation Standard Institute (ANSI) is a non-profit, private organizations that has a mission to facilitate standards throughout many various industries. Under that mission, ANSI has created national standards for single family residential measurements in the appraisal industry.
Under ANSI standards, Gross Living Area (GLA) is the term used in most residential appraisal reports. GLA is defined by The Dictionary of Real Estate Appraisal as the “Total area of finished, above-grade residential space; calculation by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space. (Finished basements and attic areas are not generally included in gross living area. Local practices may differ under some circumstances).” The appraisal industry relies on these standards in order to ensure appraisers are comparing apples to apples when measuring and valuing a property. Additionally, a consistent measuring method can reduce liability for parties involved in a residential purchase transaction. One aspect of the GLA that garners many questions and often creates confusions is when the living or finished are in the basement is not included in the GLA, particularly if the home is listed and being marketed a higher square footage that includes the finished area of the basement or terrace.
Aside from ANSI standards, the GSE”S (Fannie Mae and Freddie Mac), FHA/HUD, VA and the USDA instruct appraisers to count only finished above-grade areas when calculating the GLA. If any portion of the improvements is below-grade, regardless of quality or the presence of windows, it should not typically be included in the GLA, but would be accounted for in the basement & finished rooms and below grade on the sales comparison appraisal grid.
Commercial buildings square footage is not typically calculated by ANSI standards. Since commercial buildings are commonly traded for business occupancy or rental income, the industry accepted measurement unit is Gross Building Area (GBA). Gross building area typically includes all heated and cooled areas. Basements may be included in this calculation if the appraiser determines that the finished, access, and utility are similar to the above grade areas of the building. It is common to include unheated and/or uncooled areas of industrial buildings in the GBA since the use of that space is typically critical to the function of the property.
Another measurement term sometimes used in commercial real estate appraisal is Net Rentable Area (NRA). Net Rentable Area is actual square footage of a building that may be leased or rented to tenants; the area upon which the lease or rental payments are computed. It usually excludes common areas, elevator shafts, stairways, and space devoted to cooling, heating or other equipment. This term is also called Net Leasable Area (NLA) is some areas of the country.
Dart Appraisal is a leading, nationwide Appraisal Management Company, that provides both residential and commercial appraisal solutions. Through innovative technology and unparalleled customer service, we create custom solutions to meet our clients’ unique needs.
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