Student handout modules 1 & 2 - amended

LREC 2015 Mandatory CE

Course Developer: Cheryl B. Bella, MAI, AI-GRS 1

PROPERTY MEASUREMENT AND PRICING

_______________________________

LREC 2015 Mandatory

Continuing Education

COURSE DEVELOPER: CHERYL B. BELLA, MAI, AI-GRS

Real Estate Appraiser & Consultant

[email protected]

(225) 933-7971

LA Certified General Appraiser #G 0394

Texas Certified General Appraiser TX 1380278 G

MODULE 1

ANSI Standard Details


What do you measure and report as the area of a house?

�TAUR

� T = Total (all contiguous area)

� A = Area (finished and unfinished)

� U = Under (must have a solid base)

� R = Roof (roof coverage must be consistent like and quality, with finished ceiling)




HOUSE AREA BREAKDOWN

Total Area Square Feet�Living Area

�Storage

� Porch /Covered Patio

�Other

�Car Storage

� Garage

� Carport


Can you define

LIVING AREA?


Per NAR,Living Area is

Not Defined




Per The Appraisal FoundationLiving Area is -

Not Defined


Per the US Air ForceNet Living Area is -

Generally defined as the floor area of the living room, bedroom, bathroom, and

kitchen/dining area, measured from the inside face of the room walls.


Per “AccuCoverage”Living Area is -

The size of a home (in square feet) based upon the exterior dimensions. This total should include the square footage of the main home as well as the square footage of the wing or addition if one has been specified.




Per the Queensland Government, Living Area is -

The standard number of sheep and/or cattle required to form a viable economic unit.


Consistency


How to get a copy of ANSI-Z765 –http://www.homeinnovation.com/about/bookstore

Phone Number – (800)638-8556




Who is ANSI?

� ANSI is the registered trademark of the American National Standards Institute

� ANSI is a central body responsible for identifying a single, consistent set of voluntary standards and verifying that the principles of openness and due process are heeded.


WHO CONTACTED ANSI?

NAHB –

National Association of Home BuildersIn 1994, pushed primarily by Home Builders Association of Greater New

Orleans, the NAHB Research Center established a committee to develop

measurement standards for detached and

attached single family houses.


Who is represented on this Committee? (partial excerpt)

� American Assoc. of Certified Appraisers� The American Institute of Architects� The Appraisal Foundation� BOMA International� Bureau of the Census� Employee Relocation� RS Means (estimator)� Fannie Mae� Freddie Mac� NAHB� National Association of Realtors (NAR)� US Department of Energy� HUD




WHY?

� Before adoption of the standard in 1996, no nationwide standard existed in the United States for measuring square footage in single-family houses.

� Commercial standards have existed since 1915.


Why do we need the ANSI Standard?

Without ANSI, your only direction is whatever is acceptable in your local market!

ANSI Provides

Uniformity in Method

And

Uniformity in terms


What Property Types are Covered by ANSI-Z765?

� Detached single-family houses

� Attached single-family houses

(Note – A Condo is not classified as a single family house)




Per ANSI,

� Detached Single-Family House – A house that has open space on all its sides.

� Attached Single-Family House – A house that has its own roof and foundation, is separated from other houses by dividing walls that extend from roof to foundation, and does not share utility services with adjoining houses; may be known as a townhouse, row house, or duplex, for example.


ANSI HOUSE AREA BREAKDOWN

� Finished Area

�An enclosed area in a house that is suitablefor year-round use, embodying walls, floors,and ceilings that are similar to the rest of thehouse.

� Unfinished Area

�Sections of a house that do not meet thecriteria of “finished area”


How does this compare to our market terminology?




ANSI TERMS VS. MARKET TERMS

FINISHED AREA

LIVING AREA


ANSI VS. MARKET TERMS

UNFINISHED

AREA

Covered Area(attached)

Car Storage(attached)

Storage(attached)

Garage CarportPorchScreened

PorchCovered

PatioStorage Room Workshop


ANSI - How to Measure?

Finished Area is measured to the “exterior finished surface of the outside walls”, if detached

Finished Area is measured to the “exterior finished surface of the outside wall or from the centerlines between houses” if attached




Sky-Cam View of Adjoining Areas

Townhouse “A”

(Finished Area)

Townhouse “B”

(Finished Area)



Townhouse “A”

(Finished Area)

Townhouse “B”

(Finished Area)



Finished Adjoining Unfinished

(Finished Area) (Unfinished Area)






Living Area

(Finished Area)

Garage

(Unfinished Area)




Living Area

(Finished Area)

Garage

(Unfinished Area)




Living Area

(Finished Area)

Garage

(Unfinished Area)




Finished Adjacent to Unfinished

� Where finished and unfinished areas are adjacent on the same level, the finished square footage is calculated by measuring to the exterior edge or unfinished surface of any interior partition between the areas.


Finished Areas – Further Clarified

� Finished areas must be attached by other “finished areas” in order to be included in the finished square footage

Room accessed through garage - not includedRoom accessed across carport - not includedRoom accessed only from exterior stairway – not includedDetached structures – not included


� Finished areas that protrude beyond the exterior finished surface must have a floor to be included (e.g. – flower pot window, fireplace without base is not part of finished area)

Finished Areas – Further Clarified




� Finished Area is computed for each level (areas of the house that are vertically within 2 feet of the same horizontal

plane)

� Make a distinction between finished above grade and finished below grade

� Ventilation and lighting are not specified requirements of the ANSI standard –refer to market standard


FINISHESFOR WALLS AND CEILINGS

� Painted gypsum wall board

� Wallpaper covered plaster board

� Wood paneling

� Etc.

ANSI initially indicated that chemically treated flooring was


FINISHES FOR FLOORS

� Carpeting

� Vinyl sheeting

� Hardwood flooring

� Concrete floors with decorative finishes, but do not include bare or painted concrete




The ANSI Focus

Consistent Like and Quality Throughout intended for year-round use!


MODULE 2

Comparable Analysis


RECAP PHYSICAL BREAKDOWN

� Relate Physical Breakdown to CMA

�What is a Comparative Unit?

� Is it the same for all property types?

�What and why for SFR?




Comparative Unit

� The components into which a property may be divided for purposes of comparison

� The best unit of comparison is the one that results in the most narrow data set range


What is the known in every transaction?

� Sales Price� Seller (vendor)

� Buyer (vendee)

� Date

� Recordation Information

� Legal Description


Example: 15 sales ranging from $200,000 - $400,000

Can you tell me the most probable price of a house in this area?




Known_________________

Why?


Comparative Unit Ratio:

Remember, this can only work with numbers!

What is the known in every transaction?

Sales Price


What is the why?

That’s the game: test comparative units




What is the unit of Comparison for Single Family Residential Dwellings in Your Market?

� TOTAL AREA or � LIVING AREA/ FINISHED AREA


PROBABLE PRICE OF SINGLE FAMILY RESIDENTIAL STRUCTURES IS MOST OFTEN

DRIVEN BY?

�LIVING AREA


Units of Comparison for Various Property Types – “price per?”

� Nursing Home

� Restaurant

� Retail

� Parking Garage

� Trailer Park

� Apartment




To Begin, compute this ratio for each comparable:

Known (Sales Price)

_________________________

SF of Living Area


$200,000 - $400,000SP/LA SP/LA SP/LA SP/LA

$115/SF $120/SF


Does this work every time?

� No!

� You must review the answers to determine if you are reflecting the motivations of buyers and sellers




Example:

� House in a built-out high-demand subdivision with no lots available for sale.

� Subject is an older ranch style house.

� Sales Price/SF of L.A. produces a wide range conclusion.

� What could potentially be the denominator?


Example

� A 4500 SF house in a neighborhood of houses ranging from 2300-2600 SF.

� The typical unit value in the neighborhood is $115-$120

� What is the likely unit value of the subject?


Using Unit Value to adjust for unique characteristics

� Competitive Houses sell for $100/SF

� House sells with a pool for $330,000

� House living area is 3000 SF

� What is the value of the pool?




Computation


Other Extractions

� Extra Lot Area

� Guest House

� Workshop

� Etc.


Comparative Unit Analysis is Key

� Most accurate.

� Reflects the actions of buyers and sellers.
