Using the Standards for Measuring Residential DwellingsRobert Moorestandards, appraisal, ANSI, As our industry continues to rebound from the turbulence experienced in late 1998, many lenders
have been faced with the difficult challenge of operating in an increasingly competitive market
that offers a decreasing level of loan quality.
The appraisal review process is one area that seems to highlight this challenge the most. While
many lenders in our industry have successfully relied upon additional software to improve the
appraisal review process, some have struggled with this issue and have improperly attempted to
base loan decisions on supplemental reports that provide inferior data (i.e. drive-by appraisals,
field reviews, etc.). The fact is, the ability to apply a more uniform standard to appraisal analysis
has become an increasingly daunting task.
Many in our industry agree that the appraisal review process is a combination of both art and
science. However, the surprising fact is that we still see many inconsistencies with the
supposedly more objective part of this analysis, or the scientific and technical applications of the
appraisal review process.
To illustrate the point, in April of 1996 with little fanfare, a voluntary standard was adopted for
measuring and calculating the gross living area of detached and attached single-family residential
buildings. Although approved two years ago by the American National Standards Institute
(ANSI), use of the guidelines is not mandatory, and they have yet to be embraced or promoted by
participants in the real estate professions.
ANSI functions as the coordinator of the United States private sector voluntary standardization
system. The intent is to ensure that the size of single-family homes is measured in a uniform and
consistent manner by tax assessors, Realtors, builders, architects, and appraisers.
While professional organizations representing each of these groups (and others) participated in
the formulation of these guidelines (ANSI Z765-1996), differing techniques for measurement
and calculation of square footage are still being utilized. This has proven confusing to the
consumer, the ultimate end-user of this information, and has prompted an increasing amount of
litigation.
Why can't anyone comparing the blueprints of two new homes be able to tell which one will truly
offer the most usable living space? Can the judge resolving a tax appeal dispute feel confident
that an appraisal report in evidence will reflect the same data as a public (Town Assessor)
record? Shouldn't the prospective purchaser of a residential property expect that an enclosed
porch or finished basement area will not be included in the listed square footage of the dwelling?
Interaction among real estate professionals must become more meaningful and productive,
allowing the comparison of "apples to apples."
Readers of this article have significant influence in the lending and real estate industries. Why
not begin a grassroots call for the universal application of the ANSI standards? Make adherence
to these simple guidelines a requirement for all of your clients and vendors. By standardizing key
information which we deal with on a regular basis, we not only improve the way we do business,
but foster consumer protection at the same time.
Robert Moore is a Corporate Appraiser for Mortgage Lenders Network USA, Inc. He may be
reached at (860) 704-6239.
