Size matters
When rules are clear, business activity expands; it shrinks when they are fuzzy. So for a housing financial ecosystem to flourish, it needs an array of reliable — deterministic, consistent, unbiased — intermediaries who produce precise unimpeachable evidence of:
Footprint: surveys.
Ownership: title and title insurance.
Financing cost: home mortgage disclosure.
Transfer: closing attorneys.
In the
It took eight years for the Gregerson family to discover their house wasn’t as big as they thought it was. The modern Colonial was advertised as a sprawling 3,200 square feet when they bought it in 1997. Only when they put it on the market this summer did they realize they had only gotten 2,700 square feet for their money.
”I was a little annoyed that it was wrong,” said Linda Gregerson. ”It was just something we never really would have thought to check.”
Indeed, since the house is a physical space, one would think it would be easy to quantify. But unlike land, which is finite, houses change over time as people build additions or remodel, so:
The Multiple Listing Service Property Information Network (MLS PIN), the largest listing agency in
Error source number 1. Now for error source number 2:
Some brokers turn to town assessing records, which may be out of date, while others take the seller’s word for it.
With no firm standard, agents and appraisers disagree on how to determine square footage, often clinging to the methods they learned when they started in the business.
”There’s no real definition out there and there’s no set guidelines,” said
Even among those with no stake in the outcome, measuring ‘floor area’ of a cubic space requires some definitions and conventions:
For the uninitiated, here’s a quick walk-through: Appraisers who set homes values find the living area by measuring the perimeter of the house’s foundation, meaning that even spaces you would hardly consider ”livable” — bathrooms, closets, stairwells, and thick walls — count toward the total. The rooms that get lopped off are porches, garages, and below-grade basements. Attics count only when heated, but, to make matters more confusing, many appraisers count standing-room attic space only. If you must crouch below the eaves, the area gets subtracted.
Which rooms to count is just the beginning of the potential error sources. Here comes another:
Newly designed and constructed homes offer up even more mysteries to home appraisers. Take the soaring foyer, for example. The grand, two-story entries of many new homes consume space that could be used as living area on the second floor. Some appraisers don’t know what to do with it, said Shaun Fitzgerald of Fitzgerald Appraisers in
”Many homes being built appear to have two full stories, but this is an atrium; you lose a room over the foyer,” he said. ”Do I measure that as living area?”
Likewise, basements create a conundrum. Appraisers and the MLS PIN agree that rooms built below ground should never be added to living area, whether finished or unfinished, heated or unheated, and whether or not there’s an exit. But some brokers consider a finished basement living area — after all, it’s still valuable space where families can store stuff or create a playroom [Or exercise room, billiard room, or home theater! — Ed.] – and sellers who consider it an integral part of the house sometimes pressure brokers to count the area. Many do so, with a disclosure explaining that the square footage includes the basement.
Better disclosure helps, as it allows customers to delve.
The New Hampshire Multiple Listing Service itemizes spaces below and above-ground so the information is patently clear.
But markets like single numbers, especially simply comparable numbers — especially people like local real estate tax assessors, for whom house size is bread, butter, and school budgets:
To make matters even more confusing for buyers, towns also differ in their assessments of varying home styles. In Billerica, where split-levels make up about one-quarter of the housing stock, the chief assessor takes basements into account.
”I think it’s appropriate to include it as part of the gross living area of the house,” said Richard Scanlon. ”If it’s finished and heated, it should be living area.”
That means homeowners are paying taxes on basements that some appraisers don’t value as part of their homes.
For markets to standardize, there must be a unifying force. This could be a trade association consortium, or it could be government. Until it happens, we have houses with multiple sizes:
Last year, broker Elaine Davis tried to help her boyfriend sell his
It turned out that the square footage was low because the assessor’s computer program couldn’t account for multilevel houses. Instead, the town had deemed the house a split-level, ignoring a mudroom, laundry room, and an office at ground level. Davis, who initially listed the home at 1,670 square feet, turned the listing over to broker Rick Freeman, who advertised it at the town’s initial assessment of 1,170 square feet. That meant the asking price was $300 per square foot — too high for a
