by Brian Forbes
How many times has this happened to you? Your appraisal report comes in and you feel the property is undervalued. Going through the report, you see that there is a discrepancy between the number of square feet that the appraiser measured, and the number of square feet on a previous appraisal or in county records. So, naturally you take the price per square foot and multiply it by the additional square footage that you think the appraiser is lacking and voila! You feel that you have a good chunk of additional value coming, right? Unfortunately, the truth is that it doesn’t work like this at all, although this is one of the most common reasons for appealing appraisals. Variations in measured and notated square footage is very common in property appraisals. Most of the time, this doesn’t affect the value in the way that many people think it does.
Remember that most of the appraisals that AMCs are involved with are done by sales comparison approach. What this means is that the value of a property is a reflection of the market’s reaction to the property and its amenities, not so much the property itself. Square footage and the price per square foot are used mainly in helping to determine or in bracketing which comparables are going to be the closest to the subject property in terms of size and quality. Within a reasonable range, differences in square footage as measured and the price per square foot aren’t going to make a difference in valuation directly. What these measurements will do is help the appraiser select comparables that are closest in terms of size and gross living area. These measurements mean even less if the criteria that the appraiser is basing their comparables on are not related primarily to size. For example, a comparable with the same gross living area and similar lot size may be an older comparable, and the appraiser may have decided to use a more recently sold comparable that is closer in terms of amenities and reflects the true market value.