In May 1996, I received the very first copy distributed to the public of The American National Standards Institute, Inc.’s, American National Standard for Single-Family Residential Buildings, SQUARE FOOTAGE-METHOD FOR CALCULATING: ANSI Z765. Now, 26 years later, Fannie Mae has announced that appraisers will be required to comply with ANSI Z765 as of April 1, 2022.
In this post, I discuss how I got the first copy, why I adopted it way back then, and why I recommend that all appraisers consider taking a course on the ANSI Z765 measuring standard.
How I got the first copy
I had become aware of the development of the standard and made repeated contacts with “the guy” (don’t remember his name) who was having it printed. I was on the phone with him when the first copies were laid on his desk. While we spoke, he picked up a copy, placed it in an envelope, and mailed it to me.
Why was I so aggressive in getting my hands on a copy of ANSI Z765? Because participating representatives from the following list of entities were involved in the development and approval process:
- American Institute of Architects
- The Appraisal Foundation
- Building Owners and Managers Association International
- Bureau of Census
- Employee Relocation Council
- Fannie Mae
- Freddie Mac
- International Conference of Building Officials
- Manufactured Housing Institute
- RS Means
- National Association Of Homebuilders
- National Association of Realtors
- S. Department of Energy
- S. Department of Housing and Urban Development
- S. Department of Veterans Affairs
- Plus almost a dozen more similar entities
Why I adopted ANSI Z765 right away
Even though it was identified as a voluntary standard, I felt if the consensus of that group was that Z765 was the proper way to measure residential property, then I should utilize that method. In fact, I immediately began using it in my appraisal practice, teaching it in my school’s classes, and did presentations on it for a couple national appraisal organizations.
I also incorporated the new standard into my pre-license courses and demonstrated it in our field trips to show how appraisers collect information in the field. Literally thousands of students left my classroom with a basic knowledge of “a recognized way to measure” and contact information to order their own copy.
Now, 26 years later, Fannie Mae announces that they are requiring compliance with ANSI Z765. About time! If ANSI Z765 had been universally adopted when it was first published, a considerable amount of wasted time arguing square footage could have been avoided.
A positive step toward consistency in appraising
Would ANSI have put an end to discrepancies if every appraiser followed it? Not entirely, as it would still depend on how tight the measuring tape was pulled, whether the tape was steel or some other material that might stretch a bit, or whether an alternative tool (laser, roller, etc.) was used. It would, though, have served to reduce measurement differences to a few inches, and therefore would have resulted in only minimal total square footage variances.
So, what about the square footage numbers from public records? Is the County Assessing Authority going to use ANSI Z765? Unfortunately? Not likely. Why? Because they typically don’t run a steel tape around the outside or enter the property to determine what qualifies as finished living area, and they usually round the measurements they do have to the nearest foot (rather than to the nearest inch or 1/10th of a foot as required by ANSI).
So, with that known discrepancy, how do we address the inaccuracies? One way is to be sure we use at least three comparables to lessen the effect of the variables. Another is to bracket the square footage and use at least one larger and one smaller comparable to help compensate. And lastly, don’t make adjustments for small differences in square footage.
Another important reason for consistent and accurate square foot numbers is the Cost Approach. Although some entities have given less or in some cases no consideration to the Cost Approach, I’m still a believer. It’s a great checks-and-balance tool in a runaway sellers’ market like we are currently experiencing.
Not long ago I read a list of the most common causes of disciplinary actions against appraisers by state appraisal boards. Listed very high on the frequency of specific sins was square foot discrepancies. A specific case that went before a state appraisal board was as follows:
Respondent issued an appraisal report and reported a Gross Living Area of 1,771 square feet. Complainant subsequently had two other appraisers measure the subject property. One found the Gross Living Area to be 1,604 square feet and the other found the Gross Living Area to be 1,623. The state appraisal board assigned an investigator to investigate the allegations that Respondent’s appraisal was overvalued as a result of the subject property being improperly measured. The investigator measured the subject property and found a Gross Living Area of 1,619 square feet. The Respondents Gross Living Area of 1,771 square feet is an error in the magnitude of 9.14% using the investigator’s measurement of 1,619 square feet as a base. Respondent measured the subject property again and found the Gross Living Area to be 1,693 square feet.
Already, appraisal-oriented schools and professional organizations are offering ANSI Z765 training. I see this as a very positive step toward consistency in appraising and recommend that all appraisers consider taking a course on the ANSI Z765 measuring standard as part of their continuing education.
Livestream CE course: Enroll in Measuring 1-4 Unit Residential Properties with ANSI Z765 Standard. Or, click here for the self-paced online course option.
Written by Steven W. Vehmeier. Steve resides in Florida where he is a state-certified general real estate appraiser and a licensed real estate broker. He has taught appraisal qualifying and continuing education courses for multiple colleges, professional appraisal organizations, his own school, and McKissock Learning since the mid-90s, often spending over 100 days a year traveling and teaching. He has authored dozens of appraisal courses and textbooks, including several for McKissock, and has been a member or affiliate of eight national appraisal organizations, and national director of two.