Who Regulates? (contingent, square footage, documentation, appraisal)

[BLAZER PROPHET]

A few years ago when we were looking for a home in the Vancouver, WA area, we would take a tape measure with us and personally measure the inside & outside of houses. We found that about 40% had grossly inflated square footage amounts (houses with an outside measurement of 1,000 SF were being listed at 1,400 SF...). We'd ask the listing realtors how this could be and get answers like, "well, it all approximate" or "There's room for a carport, so that's anticipatory"... We'd call the state regulating authority and they didn't care. The real problem is that if houses were selling for $200/SF and if that house was 1,000 SF, then the house had a fair market value of $200,000. But, bump that square footage from the real value of 1,000 SF to 1,400 SF and now the house is selling for $280,000. The realtor makes more money as it's a commission sale and the unaware home buyer pays $280,000 for a $200,000 house. The hoouse won't be worth that higher amount for a couple of decades. And that leads to more foreclosures.

So if the state doesn't think it's a problem, who would?

[nsumner]

I am not sure how it works in other states but I tell you how it works in Texas. The square footage that shows on the tax records comes from the time the builder applied for a permit and provided the taxing authority the plan of the house they were planning to put on that particular lot. However, if the house is not finished yet and the builder gets a buyer, that buyer may elect to eliminate room somewhere and expand the back room, add an upstairs, etc. The tax records will always show the measurements from the first application.

Realtors are not trained to take measurements of a house for the purpose of estimating square footage. We do it simply to show the size of the room, inner wall to inner wall. Only an appraiser will do the proper measurements doing the outer perimeter, inside, closets, hallways etc.

In my contracts, if there is a doubt that the house is smaller than what we think, I put a clause that the house price will change according to the appraiser's findings.

Naima

[DavePautsch]

In our Multiple Listing area, there are a couple of "legitimate" sources of square footage:
(1) County tax records
(2) Owner
(3) Fee appraisal
(4) Listing Agent

I generally defer to the County numbers for square footage, as they will reflect the original building permits, and any subsequent PERMITTED additions. If the home owner believes that the number from the county is inaccurate, then I'll ask what DOCUMENTATION they have to back it up. If they don't have any, I'd recommend that they have an appraisal done...

Any time there is a question, I would recommend specifically putting in the remarks "Buyer to verify square footage" and clearly identify the source of the number in the listing. I may provide interior measurements for rooms, but I am not an expert in the methodology that appraisers use...so I would not overstep my expertise there.

I've been told by some that 2 individual appraisers can come up with 2 different numbers on the same house. I asked an appraiser friend of mine about that, and he said that if that happened, it was a problem with their methodology, and that it should NOT be the case. 10 appraisers should all come up with very close to the same number 10 times!

My advice to a buyer...if the square footage NUMBER is important to you, then make your offer contingent upon verifying its accuracy. To the majority of buyers, it isn't the number, its how the home feels to them anyway. Most buyers (in my experience) don't estimate square footage accurately. They'll ask "What's the square footage of this house?" I'll say..."Why don't you guess, and we'll see how close you are." 8 times out of 10, they are off by 200 plus square feet.

[2bindenver]

The answer is no one regulates. A property's square footage is a matter of opinion, by the person who measured it.

The builder applied for a permit using the method they use, the county accepted it, the appraiser measures another way, a Realtor may or may not measure depending on local customs...

Another reason why you can't buy and sell houses over the internet without actually standing in it before closing (99% of the time.)

[Silverfall]

I agree with Dave. There is no regulation, but appraisers are considered to be the "experts" in this methodology.

I can tell you that measuring homes using the outside square footage can create problems since many homes have vaulted ceilings. I have seen "air space" being counted as square footage for a two story home before.

Most buyers hire an appraiser so they will get verification of square footage. It is not uncommon for the county and appraisers to differ, since as nsumner said, the county tax records are based on the original building plan, plus any permitted additions. That may or may not be what is on the lot.

Real estate agents are not trained to take legal measurements, we just provide approximations for room measurements, etc. I have never seen it be an issue for a buyer, since every buyer I have had has done an appraisal with the exception of my cash investors, and they are just savvy.

I have walked into many a home and told my buyers that the square footage didn't sound right to me, and that they should have the house measured if they wanted to make an offer. I don't think it needs to be regulated, buyer's just need good representation to help them think of these things.