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December 2007
Index of all
past
Affiliate Corner columns
MLS Gross Living Area reporting has inadvertent effects on real estate value
By Becky Kirkpatrick,
Priority Appraisals, Inc.
Section 1.19 Square Footage Specified: In April 2007, MLS Rules and Regulations reverted to prior methods recognized to determine GLA (Gross Living Area). What it means is “the lowest level of a home that rests on a below grade foundation, whether it be a standard, walkout or garden level is considered Basement Square Footage and is prohibited from inclusion in the GLA square footage field.”
Just when you think GLA determination would then be simple enough, there are exceptions. Those exceptions are bi-levels, tri-levels, 4-levels and raised ranches. The main, upper and lower levels of these homes are to be INCLUDED in the Gross Living Area size. BUT...there are exceptions to the exceptions: those multi-level homes with foundation-level square footage typically recognized as a basement are not to be included in GLA. THEN, a final exception to all of these guidelines: mountain properties whereby routinely the finished walkout lower level is by practice acknowledged within the GLA. Single family residences and townhomes are to be measured by the exterior walls. Condominiums are measured by the interior walls.
Now that cleared everything up, right?
Accuracy, accuracy, accuracy
Gross Living Area size is a significant factor in buyer consideration. Too small, too large, just right? With that being the case, the whole process is reliant on the “eyes of the REALTOR®” and accuracy is important. Relying on public records, such as county assessor’s recordings, may not be in your seller’s best interest. Rarely are those records accurate. The data are based on a mass appraisal system, with a visual drive by, or perhaps on the original builder permit filings during construction of multiple homes.
If ever in doubt, the easiest way to check for accuracy is to measure the garage using the laser stocked in the REALTOR® Store at the AAR office (it’s a very accurate device which I use at every job). When making an interior measurement of the garage, be sure to add one foot to each direction to include the walls. If you measure a 21-foot by 20-foot garage and public records state differently than your measurement of 420 square feet, there may be a discrepancy in the GLA of the actual home you are preparing to represent. A variance of 20 square feet would not be significant, but any square footage calculation larger than that should warrant a second look.
The accuracy of the MLS reporting – whether it be the GLA, finished square footage, design, condition, days-on-market, concessions, and/or sold price – really determines what comparables are considered in an appraisal assignment. In a perfect scenario, the GLA of the subject property should be bracketed by comparables smaller and larger than the subject, and in like condition and design. If any of the MLS data elements are not correct, it may influence the appraiser not to use a particular comparable. Unfortunately, the comparable taken out of consideration may have been the most similar comparable, if it were not for a reported element of the GLA, design, condition, etc. The subject’s value could negatively be affected by the comparable selection. After the subject closes, it in turn becomes the “freshest” comparable in the area and is utilized as such for the next six months. An appraiser is required by USPAP to maintain a workfile of each assignment for a period of five years. Included in that workfile are your MLS listings of those comparables reviewed.
Three entities rely on the “eyes of the REALTOR®” and the MLS representation of a property: the seller, agents with buyers, and the appraiser.
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