Click HERE for Part #2
When you do a home search is square footage or size of the home a consideration? Do you ever wonder how home square footage is calculated? If you own a home, or plan to, in Berks County this is an article you want to read.
Today over 90% of people searching for a new home shop online. They use web sites like Zillow.com, Trulia,com and Realtor.com. The first criteria is usually location, second is price and third is bedrooms and baths. Following close behind are land size, amenities and home size.
Would you be upset if you searched for a home online and found one you were interested in, scheduled an appointment to see it, and discovered it was much smaller than the listed size? Maybe, maybe not. Well let’s say you lived in California and made a special trip to Berks County to see that home and it was only 2,400 square feet and the listing information said 3,700 square feet. That might be a problem.
Is this scenario even possible? If so, how? Unfortunately, if the real estate is located in Berks County the answer is not just “yes” but “more than likely”.
Before we continue the following statement is necessary…There are no laws governing the way home square footage is measured and surprisingly it isn’t as straightforward as you might think. Therefore, it becomes the responsibility of the buyer to learn how a home’s square footage has been measured and it is the seller’s responsibility to disclose the size of the home as they understand it to be.
It wasn’t until the mid 1990s that a standard for measuring home square footage was developed by the American National Standards Institute, also known as ANSI. However, the ANSI standard is only a set of suggested guidelines and there are other standards out there as well. These include the FHA/VA (Federal Housing Administration/Department of Veteran Affairs) standard and the Real Estate Commission standard. There is also the American Measurement Standard which is an authoritative measurement standard for use with single-family dwellings. The AMS C42129-2009 is a voluntary guide developed for the measurement, calculation, and communication of square footage in residential dwellings. While the ANSI standard is the most commonly used, you should always ask how the home square footage was determined.
When a home buyer meets with a builder, the subject of house size is often discussed. The builder’s brochure or web site often shows home plans, square footage and price. In many cases the builder acquired the square footage from the architectural design drawing of the home model. This is commonly referred to as the floor plan. The size or square footage is calculated as the amount of climate controlled deck, or floor, space (aka, heated/finished area). This includes the full exterior measurement of the plan, less the garage (even if heated). The garage is considered unfinished utility space and can be categorized separately when appraising the value of a home. It is also customary not to double the square footage of two-story areas (no deck space on second level). This is considered an architectural enhancement and can be valued separately when appraising the home.
In Berks County, a builder needs to obtain a building permit from the township in order to construct the planned home. Obviously, there is a cost for the permit. The cost is based on the square footage of the home plan but also includes the garage and basement space. The larger the footprint, including the garage, and the bigger the foundation excavation, the pricier the permit. This is the first opportunity for the home’s actual living space to be corrupted. If the permitted square footage gets to the Berks County Assessment Office, it will be much more than the actual living Berks County home square footage. (This will make more sense as you read on.)
All the Berks County Townships I spoke with said they do not report the permitted square footage of a dwelling to the Berks County Assessment Office. So how does the Assessment Office get the square footage to list on the Public Record for the Berks County home?
If you read this article in the Reading Eagle Here is Where Part #2 Picks Up…
In 2011, I approached the Reading Berks Association of Realtors (RBAR) with concerns I had regarding the way real estate agents reported home square footage in the multi-list. They proceeded to form a committee to evaluate my question regarding how square footage is calculated and marketed to the public. I eagerly became part of the committee.
My concern was that Berks County real estate agencies were using home square footage information that was in error. In Berks County we use the Trend Multi-List system to upload information about the homes and properties we list for sale for our customers. This information is aggregated to almost every real estate web site in the known universe one way or another. Trend gets information from the Berks County Assessment Office and auto populates certain pieces of the information into the property page. One of the things that gets auto populated is, you guessed it, the home’s square footage.
The obvious thing to do was contact Duane J. Ratlisch, C.P.E., who is the Director of Real Estate for the Berks County Assessment Office. We invited him to one of our committee meetings in the hope he would help us understand how the Berks County assessment office obtains the square footage of a home. He accepted the invitation.
The question was simple. The answer was not. What we were led to understand is that the Berks County Assessment Office does not have the resources necessary to field measure every home and property in the Berks County real estate market. They use a mathematical algorithm produced by a 20+ year old software program that was sold to the Berks County Assessment Office by Mr. Ratlisch. The sale took place before he became the director of that same office. Workers from the assessment office evidently go out to homes and estimate the size of the home from the curb or exterior. This may include counting the garage and two-story space as living area.
An example given by Mr. Ratlisch of how this curbside measurement was acquired is as follows: Measure one’s thumb, yes thumb, and use that as a scale. So if your thumb is one inch and each inch is 10 feet at a certain distance looking through one eye and you stand that same distance from the home and hold your thumb up to the home you can assess the square footage with an acceptable degree of error. The estimate is fed into the computer and viola, you have an ICS sheet. This is how your square footage may have been calculated if you own a home in Berks County.
We told Mr. Ratlisch that his system may be a bit faulty. We had several examples of hand measured homes that were over 1,000 square feet higher in the public record than they were in the field. We showed him an example of one particular home that was listed at 3,740 square feet. I listed and measured the home. It was 2,400 square feet. It was difficult to believe there could be this much of an error so I measured the home twice! Mr. Ratlisch said that in such a case a home owner should contact the Berks County Assessment Office and request a field measurement to correct the error. He told me to call him the following Monday to address the issue. I called and was told that the home did not warrant a field measurement and that was it. This square footage error negatively affected the seller’s ability to competently appeal their tax assessment.
The one thing Mr. Ratlisch did say that rang true was people do not want the assessor to come into their home to do a field measurement. They are afraid the assessor will over assess the home for tax purposes. After meeting with him I assessed that it may be better to let the assessor in.
After the meeting we felt it necessary to discuss the matter with the Berks County real estate brokers and appraisers. It was evident to us that the Trend Multi-List may be getting unreliable home square footage information from the Berks County Assessment Office (Public Record). The meeting was scheduled and many attended.
We presented the evidence as it related to our findings. It became clear that there was a large difference of opinion on the subject. the appraisers were all for a standard system of home measurement but many of the Real Estate Brokers were not. The discussion came down to a matter of liability. Some thought that using the information provided by the Berks County Assessment Office was just fine. Others, including our committee and the appraisers thought it was misleading to consumers. Most appraisers stated that they have enough trouble with the lenders second guessing their appraisals. Having a more accurate standard or any standard would help all involved in the transactions.
It was agreed that we would take our effort to the Trend Multi-List committee. Trend quickly sided with the potential liability group. They stated that not allowing the use of the Berks County real estate public record as a source of information relating to the square footage of a home could have legal consequences. I then asked if the information had to be auto populated into their system. If they turned off the auto pop it would make agents either look up the number in the public record or consider measuring the home. Trend declined any changes to the auto population of the square footage and it continues still.
Not long after, we received a message from the Pennsylvania Association of Realtors legal department. The contents of the message put an end to our effort to change what our committee thought was misleading to home buyers and sellers. We were told that it was risky to allow an agent to measure a home and that the liability to the real estate community was too great.
Ok….So what does all this mean and how can it affect you?
Let’s say you purchased a home in Berks County in 2006 and want to sell it now. You remember that your house was about 3,000 square feet when you bought it. At least that is what the web site, brochure and MLS sheet said. The market is not as good now as it was back then. You need to get every penny you can. You advertise the home at 3,000 square feet and you get a buyer. The buyer asks for a home inspection (most do). Within the terms of the home inspection is a small statement that says “verification of square feet”. The inspector measures the home and it is only 2,700 square feet. What now?
The buyer could ask for a price reduction of any amount. One example would be that your marketed 3,000 square foot home is pending sale at $300,000.00. This would mean that it sold for $100.00 per square foot. The buyer may ask for a $30,000.00 price reduction. Not good. You say “No” and the buyer has the option to void the agreement.
Sound far fetched? A similar case happened in Oklahoma. The buyer was made aware of the square footage deficiency after they had purchased the home. The judge did the math just as I have done above and awarded the buyer a fair sum of money at the expense of the seller.
Let’s say the buyer is ok with the square footage deficiency and wants to continue with no value penalty. The buyer’s bank will not be as forgiving. The appraiser will come to the home and measure it. The appraiser comes up with the same deficiency of 300 square feet. The homes that sold in your neighborhood still say they are 3,000 square feet because the public record is never corrected. The appraiser will likely use between $30.00 to $40.00 per square foot. This is a $9,000.00 to $12,000.00 deficiency as it relates to an appraisal comparison.
Some appraisers will tell you that the most important item affecting value after location is square footage. It is often the single largest value adjustment they make. Now, you have to renegotiate with the buyer, lower the price or void the deal. Everyone loses time, money or more. This could all have been avoided by taking 15 to 20 minutes to measure the home prior to listing it.
The Berks County real estate market and markets across the country are challenging enough. The future will likely bring us some sort of measurement standard. Every day the lenders want more and more information in order to provide financing for a home. People who purchased homes that do not ‘measure up’ may have issues. Full, uncompromising disclosure is the only way to transfer property from seller to buyer. Our peers and governing boards sometimes trade habitability for liability. They think it is risky for a real estate agent to measure a home and list the square footage they find. Really?
This blog is not meant to put blame on anyone for peddling misinformation as it may relate to the square footage of a home. The misinformation is often put forth non-maliciously. A competent standard and ensuing education may be the solution. It is my hope that our governing bodies take steps to create or accept such a standard.
If you are searching for a home make sure you ask about the origin of the square footage. Or better yet, hire an agent that is familiar with the issue like me (selfless plug). The Trend Multi-List does allow agents to erase the Assessors public record square footage and enter either the Listing Agents assessment or the Sellers assessment. These are marked with an “A”, “S” or “L”.
This article is simply to help all who visit my web site understand the road that lies before them when buying or selling a home in Berks County. There is little fault in gaining wisdom. I hope this adds to yours.
Thank you to all the square footage committee members who donated their time to a good cause. Our efforts were not in vain!
Jeffrey C. Hogue