Establishing fair market value is a key component when buying and selling real estate and fundamental to settling on a purchase price. The appraisal plays an important role in securing financing and ensuring a smooth transition from seller to buyer. To establish a value for a property, appraisers look at several different property characteristics, one of which is the gross living area (GLA).
The GLA is the total finished, above-grade living space of a home. The square footage component in residential appraisals directly contributes to the fair market value of the property. Understanding and calculating GLA is a foundational appraisal skill. In this article, we will define GLA, how it is calculated, and explain the differences between GLA and other square footage descriptions.
Defining Gross Living Area
Determining the livable area of a property is an important part of the appraisal process. In appraisal terms, this is the gross living area or GLA. GLA is often confused with total living area (TLA) or the square footage listed on the Multiple Listing Service (MLS). Those are described in more detail below.
The GLA includes above-ground areas that are finished, heated, accessible, and meet minimum ceiling height requirements. For example, a pull-down staircase to a finished attic space is not considered accessible, but a staircase to the attic from a hallway that has a heating source is—provided the attic also meets the ceiling height requirements.
GLA excludes basements, garages, patios, and porches unless those have been converted to living space with appropriate permits. GLA is calculated by measuring the exterior dimensions of the dwelling above ground or the land line. A finished basement that is wholly or partially below grade is not part of GLA.
Finished basements generally do not command the same price per square foot as livable space that is above ground. Including these areas as part of GLA skews the data.
GLA Standards
Fannie Mae has specific guidelines for measuring GLA based on the American National Standards Institute (ANSI® Z765-2021). The guidelines are in place to create consistency, transparency, and repeatable results for appraisers. The ANSI standard provides that:
- Measurements are taken and recorded on a sketch or floor plan to the nearest inch or tenth of a foot and reported to the nearest whole square foot.
- Staircases are included in the square footage measurements of the floor from which they descend.
- Areas below grade or partially below grade are reported as basement area and not included as GLA.
- Foyers or other areas with openings to floor below are excluded from GLA.
- Ceiling heights must be at least 7 feet, or in a room with a sloping ceiling, at least 50% of the finished square footage must have a height of at least 7 feet. No portion of the finished areas can have a ceiling height under five feet.
How to Determine Which Areas Count as Gross Living Area
The areas counted toward GLA include above-grade, finished, heated living spaces. Conventional heating is required and includes forced air systems, solar, radiant, and ductless systems. A space heater is not considered conventional heating, so spaces that rely solely on portable heaters are excluded from the GLA.
Additionally, all finished areas included in GLA must have a ceiling height of at least 7 feet. In rooms with sloping ceilings, at least 50% of the finished square footage must have a ceiling height of at least 7 feet. No portion of the finished area with a ceiling height of less than 5 feet can be included in the GLA.
The living area of the attic must be directly accessible from other living areas through a door, heated hallway, or stairway.
Unfinished basements and attics, garages, and other non-living areas, such as foyers, atriums, patios, and balconies are excluded. Living areas must be contiguous. Accessory dwelling units and finished outbuildings are excluded from GLA.
The Measurement Process
For single-family homes, GLA is calculated by measuring the exterior of the property. For condominiums and other attached dwellings, GLA is calculated by measuring the interior perimeter. Measurements are taken from corner-to-corner and rounded to the nearest inch. In most markets, square footage differences under 100s sq. ft. don’t warrant an adjustment. However, it’s property- and market-specific so it is important to understand the market impact and whether an adjustment is warranted.
ANSI standards require appraisers to use a hand-drawn sketch or floor plan to show their measurements. Measurements are taken using a tape measure or laser measurement tool. The information is transferred into sketch software the makes the calculation.
In a two-story home, the exterior measurements are taken for the ground floor and then multiplied by two. The square footage of any interior areas that are open to both floors, such as foyers or living rooms that extend from the first floor to the second, is subtracted from that amount to arrive at the GLA. An accurate sketch or floor plan is needed to measure irregularly shaped rooms and open spaces.
Common Challenges and Misconceptions
The Fannie Mae Selling Guide serves as a reference for questions about how to compute and what counts as living and non-living space for GLA calculations. One of the more common challenges is how to address below-grade finished living spaces. The guidelines clearly state that all partially or wholly below-grade finished spaces are considered basements, which includes walk-out basements. These spaces should be recorded as a separate line item on the Basement and Finished Rooms Below-Grade line on the Sales Comparison Approach adjustment grid.
Finished detached structures are not considered in GLA calculations because they are not contiguous with the main living area. Therefore, they need to be included on a different line in the adjustment grid. However, attached spaces that have been converted to living spaces, such as garage, porch, or balcony conversations, count in the GLA if the required permitting is in place and the space has been finished, has heating, and appropriate ceiling height.
Rooms that do not meet the ceiling height requirements must be reported on a separate line in the adjustment grid.
It is important to note that often homes are listed according to the GLA reported in public records. These records can differ from what an appraiser reports; thus, the square footage can be off, which can equate to significant differences in price.
That’s just one reason to understand and support the adjustments made in your report. Continuing education courses such as Supporting Your Adjustments: Methods for Residential Appraisers and Residential Property Measurement and ANSI Z765 are excellent teaching tools to help appraisers justify and defend all aspects of their report.
Documentation and Reporting
Fannie Mae requires clear, descriptive color photographs of the subject property showing the front, back, and street view on full appraisals. Additionally, they require color photos of the front of comparable properties. Appraisers should also take meticulous notes as part of their workfile so that should a discrepancy arise, they can clearly defend the choices they made.
Different software programs are available to assist appraisers. Appraisal software improves efficiency and decreases the risk of human error. Sketch programs allow appraisers to input their measurements and create floor plans directly in the software, which then calculates the necessary dimensions and areas automatically.
Conclusion
Calculating the gross living area is essential in determining the value of real property. More importantly, appraisers need a uniform way to make those calculations. Fannie Mae guidelines provide clear instructions to improve consistency and transparency in the appraisal process.
Appraisers need to know and understand GLA and how to apply GLA calculations to appraisal reports. McKissock Learning offers an Unlimited Learning Membership, so you stay current with trends while meeting mandatory CE requirements. We’re here to help.
