Valuation Management Group’s quality assurance reviewers routinely review a variety of appraisal reports covering nearly every property type imaginable. Occasionally clients will ask our opinion on the size of the building; they have concerns if the appraiser measured correctly or they may not be familiar with what area is included in the calculations provided. Our goal is to help answer some questions we frequently receive regarding building size and provide some explanations of industry acronyms.
The American National Standard Institute (ANSI) is a non-profit, private organization that has a mission to facilitate standards throughout many various industries. Under that mission, ANSI has created national standards for single family residential measurements in the appraisal industry.
Under ANSI standards, Gross Living Area (GLA) is the term used in most residential appraisal reports. GLA is defined by The Dictionary of Real Estate Appraisal as the “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 gross living area. Local practices, however, may differ.)” The appraisal industry relies on these standards in order to ensure appraisers are comparing apples to apples when measuring and valuing a property. Additionally, a consistent measuring method can reduce liability for parties involved in a residential purchase transaction. One aspect of the GLA that garners many questions and often creates confusion is when the living or finished area in the basement is not included in the GLA, particularly if the home is listed and being marketed with a higher GLA that includes the finished area of the basement. Aside from ANSI standards, the GSE’s (Fannie Mae and Freddie Mac), FHA/HUD, VA and the USDA instruct appraisers to count only finished above-grade areas when calculating the GLA. If any portion of the improvements is below-grade, regardless of quality or the presence of windows, it would not be included in the GLA, but would be accounted for in the basement & finished rooms and below grade of the sales comparison grid.
Commercial appraisals are not typically held to ANSI standards. Since commercial buildings are commonly traded for business occupancy or rental income, the industry accepted measurement unit is Gross Building Area (GBA). Gross building area typically includes all heated and cooled areas. Basements may be included in this calculation if the appraiser determines that the finish, access, and utility are similar to the above grade areas of the building. It is common to include unheated and/or uncooled areas of industrial buildings in the GBA since the use of that space is typically critical to the function of the property type.
Another measurement term sometime used in commercial real estate appraisal is Net Rentable Area (NRA). Net rentable area is actual square footage of a building that may be leased or rented to tenants; the area upon which the lease or rental payments are computed. It usually excludes common areas, elevator shafts, stairways, and space devoted to cooling, heating, or other equipment. This term is also called Net Leasable Area (NLA) in some areas of the country.
Valuation Management Group is a national, full service appraisal management service company that manages the appraisal process for community banks, mortgage bankers and credit unions. We offer a full array of commercial and residential appraisal products and services. We take the appraisal process from ordinary to extraordinary.