The Correct Way To Measure Below Grade Finish?

[timd354]

But FNMA says if any is below it's all below.

But Fannie also states that you can deviate from this requirement under certain circumstances if you provide an explanation and also treat the comparable sales in a similar manner:

B4-1.3-05, Improvements Section of the Appraisal Report (10/24/2016)
Gross Living Area

The most common comparison for one-unit properties, including units in PUD, condo, or co-op projects, is above-grade gross living area. The appraiser must be consistent when he or she calculates and reports the finished above-grade room count and the square feet of gross living area that is above-grade. The need for consistency also applies from report to report. For example, when using the same transaction as a comparable sale in multiple reports, the room count and gross living area should not change.

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.
• For units in condo or co-op projects, the appraiser should use interior perimeter unit dimensions to calculate the gross living area.
• 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.

For consistency in the sales comparison analysis, the appraiser should compare above-grade areas to above-grade areas and below-grade areas to below-grade areas. The appraiser may need to deviate from this approach if the style of the subject property or any of the comparables does not lend itself to such comparisons. For example, a property built into the side of a hill where the lower level is significantly out of ground, the interior finish is equal throughout the house, and the flow and function of the layout is accepted by the local market, may require the gross living area to include both levels. However, in such instances, the appraiser must be consistent throughout the appraisal in his or her analysis and explain the reason for the deviation, clearly describing the comparisons that were made.

 

[residentialguy]

But Fannie also states that you can deviate from this requirement under certain circumstances if you provide an explanation and also treat the comparable sales in a similar manner:

Exactly. Function is the best determination in all of this.
As far as OPs comments on how to measure the finished vs unfinished, I would say to keep it consistent and measure like you would the above grade levels.