When it comes to appraising split-level and bi-level dwellings, trying to calculate the gross living area (GLA) can be tricky. If you’re trying to figure out what the gross living area of one of these types of homes is, there are some important things to consider. For example, where the ground meets the exterior wall of a particular level.
In real estate, the line at which the ground intersects with the foundation of a home, is called a grade or grade line. Did you know that where the ground meets the exterior wall of a level, can have a direct impact on value? How so? Let’s get down to the nitty gritty of it, shall we?
DEFINITIONS FOR GROSS LIVING AREA
Let’s look at Fannie Mae’s definition for GLA. The following information was taken directly from Fannie Mae’s 2019 Selling Guide. (Click here for link) It states the following:
“The appraiser should use the exterior building dimensions per floor to calculate the above-grade gross living area of a property. For units in condo or co-op projects, the appraiser should use interior perimeter unit dimensions to calculate the gross living area.
Garages and basements, including those that are partially above-grade, must not be included in the above-grade room count. Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area.
Fannie Mae considers a level to be below-grade if ANY portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count. Rooms that are not included in the above-grade room count may add substantially to the value of a property, particularly when the quality of the finish is high.”
That is clear, isn’t it? If the level of a home is partially below grade, that is, partially below the ground, it is generally not considered to be GLA. So, in a split-level or bi-level style dwelling, any levels that are partially below grade are not included in the GLA. In this situation, it doesn’t normally matter whether or not the partially below grade area can be used as usable square footage. What about three level splits in which there is a lower level that is partially below grade, and then another level that is below grade? In this case, both the partially below grade areas as well as the below grade areas are considered to be basement area, not GLA. In this instance, it means that the split-level property has a larger basement, more like a ranch style dwelling with a full basement. In the case of a three level split, the basement areas are just split into different below grade and partially below grade levels.
Now there are exceptions to this rule. For instance, unique properties such as berm homes, or other homes with unique styles. Here is a little video that shows some unique homes that may be exceptions to the rule, under certain circumstances. However, your traditional split and bi-level homes are generally not going to fall into this category.
What does FHA have to say regarding GLA? The following was taken from FHA’s 4000.1 Handbook (Click here for link):
“Gross Living Area (GLA) refers to the total area of finished, above-grade residential space calculated by measuring the outside perimeter of the Structure. It includes only finished, habitable, above-grade living space.”
It goes on to say,
“The Appraiser must: Identify non-contiguous living area and analyze its effect on functional utility; Ensure that finished basements and unfinished attic areas are not included in the total GLA; and use the same measurement techniques for the subject and comparable sales, and report the building dimensions in a consistent manner.
When any part of a finished level is below grade, the Appraiser must report all of that level as below-grade finished area, and report that space on a different line in the appraisal report, unless the market considers it to be Partially Below-Grade Habitable Space. In the case of non-standard Properties and floor plans, the Appraiser must observe, analyze, and report the market expectations and reactions to the unique Property.”
FHA’s guidelines are like Fannie Mae’s, when it comes to GLA. However, FHA guidelines do state that if the “market considers” the “Partially Below-Grade” area to be Habitable Space, then that area may be considered to be GLA.
If the appraisal is being completed based on FHA guidelines, and the partially below-grade area is considered to be “Habitable Space” by the market, and it is being valued as such, it cannot also be counted as basement area. In this case, it’s one or the other. Keep in mind that the ability to include the partially below grade area in the GLA is for “non-standard Properties and floor plans”. In my opinion, traditional split-level and bi-level dwellings would NOT fall into this category, as they are standard styles in the market.
I would not recommend including the partially below grade areas in the GLA, even if it is acceptable to do so, unless the comparable sales you are looking at are very similar in terms of style. For instance, if you are trying to price a berm home, use other berm homes. Often, GLA issues and pricing become more problematic when homeowners and real estate agents use homes with styles that are different from the subject property.
In addition to reading Fannie Mae and FHA’s GLA standards, I would also recommend looking up the American National Standard for Single-Family Residential Buildings. (ANSI Z765-2013) This is another measurement standard that many appraisers use. If further supports the information in this article. Under the heading “Above and Below Grade Finished Areas”, this version of ANSI states the following:
“The above-grade finished square footage of a house is the sum of finished areas on levels that are entirely above grade. The below-grade finished square footage of a house is the sum of finished areas on levels that are wholly or partly below grade.“
For these standards, even if the area is partially below grade, it is considered to be below grade. That is, basement area.
SOME PICTURES OF SPLIT & BI-LEVEL DWELLINGS
Here are some examples of split-level and bi-level homes. This first picture reflects a bi-level home in which the lower level is partially below grade. Notice that it offers a walk-out basement. In this example, the GLA would generally only consist of the areas that are completely above ground.
Here is a picture of a split-level in which the lower level is partially below grade. (On the right side) The partially below grade area to the right is not considered to be GLA due to its being partially below ground. Even if it is a walk-out basement in the back.
Occasionally, I will see a bi-level home in which the lower level is above grade. (If you walked around this home you would see that the lower level is above grade on the rear and sides as well. If this is the case, I would include the lower level in the GLA, because it is above the ground. In this example, there is no basement.
Here is a picture of a split-level dwelling in which portions of the lower level are above grade. There is a partial basement that is completely below grade.
A REAL-LIFE EXAMPLE OF THE IMPORANCE OF GETTING THE GLA RIGHT
Let me share with you an experience that I had, not too long ago, that further demonstrates why it is important to have an accurate understanding of a home’s gross living area.
I appraised a split-level property for a purchase. My client was a bank and this was going to be a Fannie Mae loan. My opinion of value was around twenty-five thousand dollars below the contract price. Why so much lower? It was all about the GLA!
It’s important to note that this particular split-level property had been renovated about three years ago. It was listed on and off, since it had been renovated. Originally, it was listed in the 150’s, then raised to the 160’s. Over a period of three years, it never sold. (That should tell you a little something about its market value.) Then, it was recently listed again in the upper 160’s and sold in the mid 170’s. Not surprising! It had great market appeal because of its renovations. And, due to the extended shortage of inventory we have had in recent years, buyers are desperate to find homes that are turn-key.
The County Auditor reflected this property as having 1,200 sq. ft. of GLA. It was listed as such. It was also listed as having four bedrooms and one and a half bathrooms. During my inspection, I measured this property and found that it only had 960 sq. ft. of GLA. The other portions were either partially below grade, or completely below grade, including one of the “bedrooms” and the half bathroom. Therefore, instead of being a 1,200 sq. ft., four bedroom, one and a half bath home, it was actually a 960 sq. ft., three bedroom, one bathroom home.
Using several different methods, I estimated the market price per sq. ft. to be $70. The difference between 1,200 sq. ft. and 960 sq. ft. was about $17,000. Based upon my research and analysis, the difference between having one full bathroom vs. one and a half bathrooms, in this area, was around $3,500. To add insult to injury, the property only had a one car garage versus most homes in this neighborhood having two car garages. Based upon my research, the difference between a one and two car garage was around $7,000. By the way, the subject property is also located on a street that experiences heavy traffic.
My opinion of value for this property was considerably lower. I used very comparable sales, one of which was on the subject street. The others were located on comparable streets. All were comparable to the subject. Interestingly, if the subject’s GLA, bedroom and bathroom count were as reported in the MLS and public records, the sales price would have been in the ball-park of the contract price.
Clearly, getting an accurate gross living area calculation is extremely important to obtaining an accurate opinion of market value! As I demonstrated in this article, much depends on how much of a home is below or partially below the dirt!
Many people I have visited with, including seasoned real estate agents, often do not understand what is considered to be gross living area. I highly recommend that all real estate agents carefully read through Fannie Mae’s 2019 Selling Guide and the FHA 4000.1 Handbook. Both are free and accessible on the web.
I hope you found this information helpful! Please don’t hesitate to call me or another appraiser in your area if you have questions about what constitutes gross living area. We are here to help! And if you are looking for an appraiser outside of Northeast Ohio, please check out http://www.findmyappraiser.com. There, you can search for a qualified, independent appraiser in your area.
I have updated this article with an episode from my podcast, Home Value Stories. In it, I cover some of the same information as I have shared in this article. I hope you enjoy it! Click here to listen.
If this article on splits was a total snoozer for you, enjoy this video of another kind of split. Enjoy!
Thanks for being here! Have a great day!
Here are some links to other articles and videos I enjoyed recently! I hope you will also…
Buckle Up: Rates Are Falling and Housing Market is Confused – Housing Notes by Jonathan Miller
The invasion of tech companies in real estate – Sacramento Appraisal Blog
Do Birmingham Home Appraisers Set Local House Values? – Birmingham Appraisal Blog
Is An Industry Standard for Property Inspection Necessary? – George Dell’s Analogue Blog
Frank Lloyd Wright Fixer; Spreadsheet Shackles; Homes under $100,000 – APPRAISAL TODAY
What is a comparable sale – Ann Arbor Appraisal Blog