It's Hip to be Square Footage Savvy

October 11, 2012

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Marketing the square footage of your homes? Be sure you're doing it the right way with the American National Standards Institute-approved standard.

There are many different regional and local practices for calculating floor area. With the introduction of Square Footage - Method for Calculating ANSI Z765 in 1996 came an authoritative definition and methodology to measure and calculate “finished area.” The square footage standard is a consensus standard that defines criteria for calculating “finished area” in one- and two-family houses, which serves multiple purposes.

It is a standard of care that is used for real estate transactions.
It provides local governments with a basis for taxation.
It has been used successfully to defend against lawsuits where the buyer feels that a house is smaller than that what was represented by the seller. While each party may be of good intention, the marketplace can be confusing due to the historic lack of consistency.
It is used by appraisers to establish comparables and market selling price for properties.

The value of finished area as represented by dollars-per-square-feet is the most contested topic that comes across my desk. In particular, there is typically a wide gap between the assumed value of finished below-grade area to that of above-grade area. And, the cost to construct and finish a below grade area may be equivalent or even more for the above grade area. For a broader discussion on the principals and practices used by appraisers, the Appraisal Institute’s text Appraising Residential Properties, Fourth Edition, 2007, provides a comprehensive treatise on the various valuation methods to assess residential properties. That text uses the ANSI square footage standard as a primary reference.

The basic principles in the square footage standard are straightforward.

Finished area is a nominal area, much like a wood stud where the actual dimensions are 1.5" x 3.5", and not 2" x 4".
A building is measured from the outside, including the cladding, so the area includes the thickness of exterior wall as well.
Below-grade finished area is reported separately from above-grade finished area.
There is a minimum height limitation for ceilings that apply to bulkheads and sloping ceilings.

The Home Innovation Research Labs is the secretariat for the Square Footage - Method for Calculating ANSI Z765 standard, and earlier this year administered the standard's most recent consensus-based review and update process. Printed and electronic versions of the standard are available through our bookstore.

What are the biggest square footage issues you encounter?

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