When it comes to buying or selling a home, square footage is a critical factor that can significantly impact the property’s value. However, understanding how square footage is calculated and the differences between a home appraisal and an assessment can be confusing for homeowners and potential buyers. In this article, we’ll shed light on these concepts to help you make informed decisions in the real estate market.
What’s the Difference Between an Appraisal and an Assessment?
Before diving into square footage, let’s clarify the distinction between a home appraisal and assessment. Both are used to determine the value of a home, but the terms are not interchangeable.
Appraisal
A home appraisal is an unbiased estimate of a property’s value conducted by a state licensed appraiser. It is the fair market value of a home. The appraisal impacts the home selling price and mortgage amount and is used to help ensure that the lender and home buyer are not asked to loan or borrow more money than the home is worth. Factors that can influence the value of the home include location, condition, and amenities. Appraisal calculations have been standardized and rooms with dormers or lofts may no longer be included in the home’s square footage and therefore, not included in the corresponding appraised value. If you are getting a mortgage, you may find the appraised value is less than you thought it would be, so plan accordingly.
Assessment
An assessment is the value assigned to a property by a tax assessor for property tax purposes. This value is used to determine your annual property tax bill. The assessed value may not reflect the current market value of the home.
Square Footage Matters
Square footage is a crucial metric in determining a home’s value. The larger the square footage, the more valuable the property tends to be. However, how this square footage is measured can vary.
The rules have changed to standardize how square footage should be counted in appraisals. The American National Standards Institute (ANSI) provides guidelines for measuring the square footage of single family homes to ensure consistency in the real estate industry. ANSI standards take into account the area within the exterior walls, excluding non-livable spaces, such as garages and unfinished basem*nts.
The measurement standard requires a minimum ceiling height of seven feet to count towards the square footage of the home. For example, consider a home that is 2,000 square feet with 1,500 square feet on the main floor and 500 square feet on the second floor. The second floor has 6 ½ foot ceilings. Because the ceiling is under 7 feet, the 500 square feet on the second floor does not count towards the total square footage.
Knowing these standards can help you understand what’s included in a property’s square footage.
What Homeowners Need to Know
For homeowners, it’s essential to be aware of the square footage of your property as it can influence your home’s market value. Keep in mind that updates or renovations can impact your property’s square footage and consequently, its value.
What Buyers Should Consider
As a potential buyer, don’t rely solely on the square footage mentioned in property listings. Although deemed reliable, some information is not always as accurate as it should be. You should verify measurements and other information. Also consider the new ANSI code for some areas that may not be calculated into the square footage valuation and are added as an extra room area. This ensures you’re making an informed decision and potentially negotiating a better deal.
If you are buying or selling a home and have questions about a home appraisal or assessment, contact your Zuber Realty agent.
FAQs
Put simply, assessed value is the amount your local government thinks your home is worth; it's what is used to determine property taxes. Appraised value, though, is the amount a professional home appraiser thinks your home is worth; it's typically used by lenders when considering a mortgage application.
Is the square footage on an appraisal accurate? ›
When having the home appraised, the report may actually indicate a lower square footage than the tax assessment. That could be from the appraiser not counting certain areas that the tax information may include.
How close to market value is the assessed value? ›
In most cases, there's only a 10% to 20% difference between market value and assessed value, with market value usually being the higher of the two. However, it's essential to remember that assessed value is primarily used for tax purposes and may not always reflect the current market conditions accurately.
What happens if an appraisal shows less square footage? ›
If you believe that the public records are inaccurate, you should contact your local assessment department to request that the data be reviewed. The process varies by location; some may ask you to file an appeal or submit a grievance.
What is the difference between assessment evaluation and appraisal? ›
Appraisal is the analysis of vary aspect of project/report and verify the object with result. Evaluation is after activity/event the calculation/measurement of activity is called evaluation. Assessment is done to see the impact of a programme/scheme/inputs which is on-going or completed.
What negatively affects a home appraisal? ›
Having outdated appliances, plumbing, electrical, and HVAC systems could decrease the value of your property. Dated features in your home's interior could imply that the property has not been well-maintained, which could raise concerns about any underlying issues.
Who is responsible for verifying square footage in a home? ›
Note that it is a buyer's responsibility to verify the square footage of a house before buying. Most states in the USA follow the 'caveat emptor' rule, meaning the buyer must follow due diligence before buying a property.
How do realtors measure square footage? ›
Measure the length and width, in feet, of each room. Then, multiply the length by the width to calculate that room's square footage. For example: If a bedroom is 12 feet by 20 feet, it is 240 square feet (12 x 20 = 240).
What determines the highest value for a property? ›
The reasonably probable and legal use of property, that is physically possible, appropriately supported, and financially feasible, and that results in the highest value.
Is market value usually higher than appraised value? ›
If buyers are few and far between when you list your home, there's a chance the market value will be lower than the appraised value. On the other hand, if you're seeing a ton of interest in your home from multiple buyers, you may find that the market value is higher than the appraisal value.
Market value is the most probable price a property would bring in an arm's-length transaction under normal conditions on the open market.
What is the formula for determining the market value of a property? ›
The GRM method determines the market value of a property by multiplying the gross rent multiplier (GRM) by the property's annual gross rental income. The formula to compute the GRM divides the sale price of a property by its annual gross rental income, which can be rearranged to isolate the price variable.
How do appraisers compare square footage? ›
When measuring a property, appraisers will generally start at one corner of the dwelling and begin measuring each exterior wall. The measurements are typically rounded to the nearest inch and recorded. Some appraisers may round to the nearest foot or half a foot. Each appraiser has their own method for measurement.
What if a realtor lies about square footage? ›
You can consider legal action against the seller, their agent, or even your agent, but it would be very hard to win such a case. Verifying square footage is generally the buyer's responsibility as part of the due diligence process, and winning the case would require proving fraudulent intent or other legal wrongdoing.
How do appraisers determine square footage adjustments? ›
Adjustments are calculated by multiplying an adjustment factor times the quantity difference between the subject and comparable. For example, if the GLA for the subject is 2200 sq ft and for a comparable, 2000 sq ft, the difference, 200 sq ft would be multiplied by the adjustment factor.
Does appraisal mean assessment? ›
The appraised value of your home represents the home's fair market value (what a buyer might expect to pay if you listed your house for sale on the market), while its assessed value is used to determine property taxes (which increase the larger your assessed value becomes).
What is the meaning of home assessment? ›
A home assessment means the value of the home as determined by the local assessor for the purpose of determining property taxes. Home assessments are not the same as appraisals, which are instead conducted by private, licensed appraisers.
What happens if an appraisal is lower than an offer? ›
If you've made an offer on a home and your lender's appraisal values the property at less than you've bid, the lender won't approve the full mortgage amount even if you qualify for it. In order for the purchase to go through, you may need to supply extra cash.
What does it mean when a property is appraised? ›
An appraisal is a written document that shows an opinion of how much a property is worth. The appraisal gives you useful information about the property. It describes what makes it valuable and may show how it compares to other properties in the neighborhood.
