American National Standards Institute (ANSI) FAQ
Why is Freddie Mac requiring the use of Square Footage-Method for Calculating: ANSI® Z765 with appraisals completed based on an interior and exterior inspection of the subject property?
Valuations of residential property correlate strongly with gross living area (GLA), yet historically there has been inconsistency in how to determine it. Our adoption of the ANSI standard:
- Provides a reliable and defensible method.
- Allows transparent and repeatable results for consumers of appraisal reports.
- Creates alignment across market participants.
A key factor in our decision to adopt the ANSI standard is the emergence of new technologies, such as phone apps, which can be used to measure houses, generate floor plans, and calculate areas.
Do appraisers need to adopt new technology to comply with the requirement for sketches to be computer generated?
Most appraisers already provide computer-generated (not hand drawn) sketches in their reports. Software that creates computer generated floor plans and sketches for appraisal reports is readily available and already in widespread use by appraisers.
How can appraisers and lenders learn more about the ANSI standard?
For appraisers and lenders who may need training or a refresher, there are many classes available to help them learn or refresh their knowledge of the ANSI standard. Appraisers can always contact Freddie Mac with questions or feedback on appraisal topics.
Copies of the ANSI standard may be purchased at https://www.homeinnovation.com/about/bookstore.
When common practice in the local market differs from the ANSI standard, can the appraiser modify the subject's GLA to conform to local custom?
No. The appraiser must measure and report the subject's above-grade and below grade finished and unfinished areas following the ANSI standard. Since ANSI does not include the term Gross Living Area, we are requiring that finished above-grade area that meets the ANSI standard be classified and reported as Gross Living Area.
The ANSI standard references a "Statement of Finished Square Footage"; does Freddie Mac require appraisal reports to make an affirmative statement that the standard was followed?
No. Freddie Mac does not require an affirmative statement that the standard was followed. Fulfillment of the Statement of Finished Square Footage obligation is achieved when the above-grade and below grade areas of a property are measured, calculated, and reported in compliance our requirements and the ANSI standard.
The ANSI standard describes three scenarios in which a "Declaration" is required. What is the difference between the Statement of Finished Square Footage and the declarations?
The Statement of Finished Square Footage is considered the output produced by following the standard (see Q5).
The declarations are not the result of following the standard, but rather are explanations of limitations in following the standard for certain exceptional scenarios. The scenarios requiring declarations are exterior-only appraisals, proposed or under-construction appraisals relying on plans rather than physical measurements, or situations where it is physically impossible to measure the dwelling due to factors such as steep terrain. These scenarios will require the appraiser to include a declaration. The last scenario may also require the use of the opt out code "GXX00l-".
How can lenders validate whether the appraiser used the ANSI standard?
First, lenders should include a reminder to follow the standard in their assignment engagement letter or instructions to appraisers. As with all policies, lenders are responsible for verifying compliance prior to delivering the loan to Freddie Mac. Lenders should familiarize themselves with the ANSI standard and adopt underwriting and quality control procedures to ensure that appraisal data, including finished area (GLA) and Non-standard finished area (NSFA), is accurately reported.
Lenders should verify that the sketch or floor plan exhibit in the appraisal report is consistent with the standard. For example, does it contain exterior dimensions measured to the nearest inch or tenth of a foot? Does it show the required calculations? The lender should also cross-check the sketch or floor plan against the photo exhibits. For example, does the building sketch separate out unfinished areas, below-grade areas, and areas that do not meet ceiling height requirements? Do the contours of the walls match the visual evidence in the photos?
What should the appraiser do if compliance with the ANSI standard is not possible?
If the appraiser is unable to adhere to the ANSI standard, they must enter "GXX001" at the beginning of the Additional Features field of the appraisal report and provide an explanation of why they were not able to comply. For example, if the appraiser is performing an appraisal in a state that requires appraisers to adhere to a different measuring standard, the appraiser may use the exception code and the loan may still be eligible for purchase by Freddie Mac.
See Single-Family Seller/Servicer Guide (Guide) Section 5604.2: Exhibits and addenda for appraisal reports for more information.
When completing an appraisal using plans and specifications to determine square footage(s), should the exception code "GXX001" be used?
No, the ANSI standard has an example declaration statement for this scenario in Section 4, Statement of Finished Square Footage, under "4.5, Plans -Based Method." When completing this type of appraisal, the declaration should be inserted into the Additional Features field of the appraisal report. The plans should be evaluated, and the resulting square footages reported, based on the ANSI standard.
Can appraisers use the exception code to voluntarily opt out of compliance with the ANSI standard?
The ANSI standard specifically notes that the definition of above- and below-grade could cause some houses to have no above-grade finished square footage. How should appraisers report GLA in this scenario?
Properties for which the entire square footage is below grade, such as a berm home, or a dwelling where all levels have ceiling heights less than 7’, would be eligible for the exception process described in Q8. In these instances, the appraiser must report how all areas were measured, calculated, and reported.
Is the ANSI standard required for desktop appraisals?
No. The standard is not required for desktop appraisals, nor is the exception code. Valuation assignments that are based on plans and specifications or with an interior and exterior inspection of the subject property are required to follow the ANSI standard.
Does Freddie Mac require condominium units to be measured per the ANSI standard?
The standard should not be used if the unit is an apartment style dwelling in a garden, mid-rise, or high-rise apartment building or a multi-family building. When measuring an apartment-style condominium or co-op that is part of an apartment-style or multifamily building, Freddie Mac’s policy of using interior perimeter measurements for the subject unit should be applied.
Irrespective of ownership type (condominium, co-op, fee simple, etc.), the ANSI standard must be followed for detached or attached architectural designs including townhouses, rowhouses, and other side-by-side configurations (if legally permissible - see the Annex to the ANSI standard, page 4, for more information).
Is the ANSI standard required for 2- to 4-unit dwellings?
No. The ANSI standard is not required for 2- to 4-unit dwellings.
Is the ANSI standard required for manufactured housing?
Yes. The ANSI standard applies to all detached single-family homes, including manufactured housing.
ls the ANSI standard required for the measurement of outbuildings?
No. The standard is not generally required for outbuildings. However, separate software -generated building sketch that includes exterior wall dimensions must be provided for each additional structure. If there are finished areas, a floor plan with room labels is also required.
Note: The ANSI standard must be followed for all accessory dwelling units whether attached, detached, or built in. See Guide Section 5604.2: Exhibits and addenda for appraisal reports for more information.
The ANSI standard requires any area that is partially or wholly below grade to be counted as basement; what defines 'partially' below grade?
A floor level is below grade if any portion of its walls is not entirely at or above ground level.
Will adherence to the ANSI standard cause confusion when the subject GLA differs from other sources such as MLS or public record?
GLA from appraisal reports is already often different from other sources. It is common practice to treat some finished areas separately from GLA due to low ceilings, inferior quality, below-grade walls, or separation from the main living area. Many factors such as variability in definitions, methodologies, or precision of execution can exacerbate differences.
The benefit of adherence to the standard is that it enables appraisers to explain how above- and below-grade areas are derived in consistent, professional terms. This results in greater clarity for consumers of appraisal reports. It will also enable lenders, real estate agents, and other participants in the transaction to better anticipate appraisal outcomes, which can help reduce loan closing issues.
The GLA of comparables available to appraisers may not be based on the ANSI standard. How should appraisers manage this issue?
GLA found in local MLS systems and assessor records may not have been derived using the ANSI standard for measuring and calculating square footage. The appraiser may not know what methods real estate agents or assessors use to ascertain GLA. Appraisers already routinely deal with this uncertainty, regardless of what measuring, calculating, and reporting method the appraiser uses for the subject property.
Through research and knowledge of the local market, appraisers determine if the GLA of the comparable should be adjusted relative to the subject. Appraisers will continue to perform this analysis like they have always needed to do.
How should appraisers account for rooms located in above-grade finished areas that do not meet ANSI standard minimums?
The ANSI standard does not address room counts. Additionally, above-grade finished areas that do not meet ANSI standard are to be classified as Non-standard Finished Area (NSFA). Appraisers should include rooms located in these areas in the room counts (Total Rooms, Bedrooms, Bath(s)) in the Improvement section and in the Sales Comparison Approach grid of the appraisal report to comply with Uniform Appraisal Dataset requirements.
When the ANSI standard excludes finished areas, resulting in a smaller GLA, does this adversely affect the value of the property?
No. The ANSI standard defines a transparent, professional approach to describing the subject, which gives appraisers a consistent starting point for the valuation analysis, but it says nothing about how appraisers conduct that analysis. Applied correctly, adherence to the standard does not change the value of the property.
How should appraisers value finished areas that do not meet the ANSI standard ceiling height requirements for finished square footage?
When the subject property has an area that does not meet the ANSI minimum ceiling height requirements, this square footage is to be classified as Non-standard Finished Area (NSFA) and must be reported on a on the first blank line of the adjustment grid. Similarly, we require the appraisal report to account for all other square footage that is not included in the finished area (GLA).
Our longstanding policy on adjustment rates has not changed - we require appraisal adjustments to reflect market reaction. This is explained in Guide Section 5605.6 Sales comparison approach: “Each comparable sale must be analyzed for similarities and differences between it and the subject property. When the appraiser's analysis concludes an adjustment is necessary, the appraiser must make an adjustment for differences and indicate the dollar amount of the adjustment to reflect the value of the differences to the market.” It is up to the appraiser to determine the market reaction for (NSFA), which may be greater than, less than, or equal to that of the GLA.
Reminder: Freddie Mac does not have restrictions on gross, net, or line-item adjustments.
When a manufactured home is an accessory dwelling unit (ADU) the ANSI standard is followed to measure and calculated the areas of the unit. What is reported on the appraisal?
The appraisal report must reflect the finished areas, non-standard finished areas, and unfinished areas of the ADU.
Freddie Mac has included a table in Guide Section 5604.2 that identifies which appraisal assignments require use of the ANSI standard. For applicable assignments, what version of the ANSI standard should be used?
The version of ANSI that is active as of the effective date of the appraisal must be used for that assignment.
The ANSI standard does not include the term Gross Living Area (GLA). Instead, the ANSI standard includes the terms Finished Area, Unfinished Area, and identifies areas with finish that do not meet the requirements of the standard. How do these terms...
Question: The ANSI standard does not include the term Gross Living Area (GLA). Instead, the ANSI standard includes the terms Finished Area, Unfinished Area, and identifies areas with finish that do not meet the requirements of the standard. How do these terms translate to the current suite of GSE appraisal forms?
Answer: To ensure that the results of a property measured using the ANSI standard are reported consistently, Freddie Mac is equating the ANSI’s above-grade Finished Area with the Gross Living Area (GLA). We have created the term Unfinished Area (UA) to align with ANSI’s Unfinished Area, and Non-standard Finished Area (NSFA) was created to accommodate finished areas that do not meet the ANSI standard.
Since the appraisal report forms do not have fields dedicated to the reporting Non-standard Finished Area (NSFA) and Unfinished Above-grade Area (UA), where should these areas be reported?
When NSFA is measured and calculated, it must be reported on the Additional features line in the Improvements Section and on the first of the three blanks line at the bottom of the Sales Comparison Approach grid. Unfinished Area should also be reported on the Additional features line in the Improvements Section and on either the second or third blank line at the bottom of the Sales Comparison Approach grid.
Is the ANSI standard required when the property is inspection is completed by a property data collector?
Yes. When a property data collector completes the property inspection assignment that will be used as part of a hybrid appraisal, the measurements and area calculations must be made using the ANSI standard.
When a property has non-standard finished area (NSFAS), this area must be reported on the first blank line of the Sales Comparison Approach grid of the appraisal report. Are there specific places on the appraisal report where an ADU...
Question: When a property has non-standard finished area (NSFAS), this area must be reported on the first blank line of the Sales Comparison Approach grid of the appraisal report. Are there specific places on the appraisal report where an ADU, unfinished area (UA), or detached structures should be reported?
Answer: No. Freddie Mac does not have specific reporting requirements for these property features. The appraiser's description of the subject property must be complete and accurate, and the opinion of the market value of the subject property must be accurate and supported. Each comparable sale must be analyzed for similarities and differences between it and the subject property. When the appraiser's analysis concludes an adjustment is necessary, the appraiser must make an adjustment for differences and indicate the dollar amount of the adjustment to reflect the value of the differences to the market.
If an appraiser is completing an appraisal assignment based on plans and specifications and makes an inspection of the subject site to find the property improvements are substantially complete, does the appraiser measure the improvements or rely on the...
Question: If an appraiser is completing an appraisal assignment based on plans and specifications and makes an inspection of the subject site to find the property improvements are substantially complete, does the appraiser measure the improvements or rely on the plans and specifications provided and include the ANSI required Declaration #2 in the “subject to” appraisal report?
Answer: plans and specifications appraisal assignment would rely on the plans and specification submitted for the assignment and the report would include ANSI Declaration #2.