GLA Definitions (different sources) and Inference on Enclosed Porch

[Tumbuktu]

Every once in a while I come across a property, where an 'Additional Room' has been added to the main building(mostly porch gets converted to the room). It is finished and functional but not connected to the main HVAC System and instead has a separate window or split air-conditioning unit. I am trying to get the answer to whether to consider it in GLA or not. The answer looks YES by looking at whatever definition of GLA I could get my hands on.

SOURCE - Page 590-591 ; Fannie Mae Selling Guide – June 2014

When calculating gross living area

• The appraiser should use the exterior building dimensions per floor to calculate the above-grade gross living area of a property.
• Garages and basements, including those that are partially above-grade, must not be included in the above-grade room count.

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. Rooms that are not included in the above-grade room count may add substantially to the value of a property, particularly when the quality of the finish is high. For that reason, the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the Basement & Finished Rooms Below-Grade line in the Sales Comparison Approach adjustment grid.


MY COMMENTS: Emphasis is more on below and above grade. Nothing that says anything about HVAC

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SOURCE - Dictionary of Real Estate Appraisal (5th Edition)

Total area of finished, above-grade residential space; calculated by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space. (Finished basements and attic areas are not generally included in total gross living area. Local practices, however, may differ)

MY COMMENTS: Again emphasis is more on above and below grade and not to consider basement in GLA.

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SOURCE - FHA Valuation Protocol 4150.2 (Page D 26 -27)
....A room is a livable area with a specific use.

MY COMMENTS: No mention of GLA in particular and emphasis is on whether to consider 'a room' a room or not.

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SOURCE - ANSI Z765-2003 (PAGE 1 OF 11)

Finished Area:
An enclosed area in a house that is suitable for year-round use, embodying walls, floors, and ceilings that are similar to the rest of the house

Unfinished Area:
Sections of a house that do not meet the criteria of finished area.

MY COMMENTS: Word 'GLA' not mentioned at all. However the said 'Additional Room' could fail to pass the definition of Finished Area.

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CONCLUSION: It is a Judgment Call of the appraiser. There is no clear line drawn in the case of 'Additional Room' the way line has been drawn for basements and any rooms below the main level.

 

[hastalavista]

CONCLUSION: It is a Judgment Call of the appraiser. There is no clear line drawn in the case of 'Additional Room' the way line has been drawn for basements and any rooms below the main level.

I think I agree with you in substance:
It is a judgment call by the appraiser, but the appraiser uses her or his knowledge of the local market to make that call; how the market accepts and values the area in question is the key, IMO (Hence, Fannie & the Dictionary's comment that local practices may vary).

Now, I also believe a client can impose some standards: for example, a client can require that any area identified as GLA be permitted. No problem.
However, what a client cannot dictate (in an as-is value appraisal) is if the area is valued in the appraisal; contributory value is a market-thing, not a client assignment-condition thing.

Assume there exists an enclosed patio that has been modified to function as living area and would be accepted and valued as such in the market (many of us have seen something like this):
Would this qualify as "GLA"? Sure.
Could it be identified as something else? Of course.
What is the significant issue in an as-is appraisal? How does the market react and value the area.
Can a client require such an area to be permitted? Sure.
Can a client require that such an area not be included in the value in an as-is appraisal? No; contributory value of any significant component that affects value must be considered in an as-is appraisal.

My 2-cents.
:new_smile-l:

 

[Mike Kennedy]

OP "I am trying to get the answer to whether to consider it in GLA or not."

The local (Village, City, County or State) governing Municipal Building & Zoning Department(s) has/have the info you seek:

governing Building Ordinance(s), (occasionally Zoning ordinance(s) governing parking garages, setbacks etc.), and a subject's municipal building records (applicable required (or pre-existing improvement) building permits, certs of compliance/occupancy, if any) will instruct you on specific requirements.

 

[bnmappraisal]

I think I agree with you in substance:
It is a judgment call by the appraiser, but the appraiser uses her or his knowledge of the local market to make that call; how the market accepts and values the area in question is the key, IMO (Hence, Fannie & the Dictionary's comment that local practices may vary).

I think I have to agree with Denis. I run into this similar situation often enough. Actually I just inspected a similar type property yesterday and am deliberating the same question.

Here in FL it is sometimes a difficult thing to decipher. Many "rooms" here can be finished, but not have heat/air. It is up to the market to determine whether this is GLA or not. TYPICALLY these end up being considered Enclosed Porches/Florida Rooms/3 Season Rooms. But sometimes the market will recognize a "bonus" room (or whatever the realtor ends up calling it) as finished when it has reverse cycle heat/air window unit. I've run into this before.

 

[KenAZ]

You have to make a judgement based partially on Functionality. That is only your judgement. No other housing authority or lender or zoning officer understands this. That is why we inspect these homes, and theoretically use our own judgement, something that has been lost over the last decade.

 

[Terrel L. Shields]

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.

Depends upon how you define "below-grade". Does that mean on a different elevation plane? Or does it mean the quality (grade) is lower. If the former, then the issue is height level with the rest of the house. If not, it is below grade because it lacks CHA and depends upon a secondary source of heat and air.

the appraiser uses her or his knowledge of the local market to make that call; how the market accepts and values the area in question is the key, IMO (Hence, Fannie & the Dictionary's comment that local practices may vary).

That is more fanniespeak BS. There is no "community standard" handbook that I know of. And how the "market accepts and values" same is inscrutable.

The simple fact is that if you try to compare an 1,800 SF house with a 400 SF enclosed porch or garage to a 2,200 SF home, you gonna very likely have problems - especially since, you end up hunting 2,200 SF homes in an 1,800 SF neighborhood, or go looking for that rare conversion. And the appearance is going to be a major issue. Is the addition frame enclosed next to the primary house brick? Or is there a clear difference in brick color or design? Is it insulated? Is the foundation the same (ie- the rest of the house sits on a wood subfloor but this addition is concrete slab...perhaps one with minimal footing?

Segregate accordingly and value separately - that's my advice.

 

[Tumbuktu]

There is no "community standard" handbook that I know of. And how the "market accepts and values" same is inscrutable.

This is 'Absolutely Correct'.

Taking the case of purchase transaction; If Broker/Realtor is the one who is defining it, (usually they have already determined it by putting the inflated GLA in the MLS Listing) then he/she will say, include in GLA anything that is enclosed, as it would increase the GLA and hence the price.