RVA Real estate professional... we need to talk.
Updated: Feb 3, 2021
Since beginning to appraise in the RVA area, I've noticed a common trend in the MLS that is causing confusion among agents, appraisers, and the national database of home sales run by Fannie Mae, and it has to do with basements. The CVR MLS is explicit that the finished area in the basement of a home is NOT to be included in the finished area of the home, but I have literally never seen a case where this was followed. This results in inflated home sizes, deflated price/sf metrics and makes agents look bad. So, today, we're going to talk about what a basement is... appraisers, don't tune out yet. I've also noticed a trend that appraisers in the RVA area don't know how to report split foyers/tri levels, and this is causing a headache at a regional scale.
First we need to address GLA or Gross Living Area. Fannie Mae, the predominant intended user of appraisals, defines GLA by the following (Selling Guide B4-1.3-05):
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.
It's that last one where the appraisers in the room need to revisit. In case there is any confusion on their meaning, they go on:
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.
So, any level of the home that is partially/fully below grade is to be reported as basement. There are exceptions to this rule (bank homes are noted), but in these cases you have to make a detailed comment on how/why you diverged from the FNMA guidance and how you stayed consistent across the board.
Appraisers, when was the last time you did that with a split foyer/multi-level?
Agents, if your buyer comes back to you a year later because you misrepresented the GLA of the home in order to get the finished number higher... will that defence hold up in court?