When you see a house, and like it, and are ready to put in an offer, you may know what it’s worth to you …. what you’re willing to pay. (Same holds true if you are buying a piece of art, or a dress.) Price and value are subjective. And they (at least in part) hinge on your budget.
If you’re getting a mortgage though, the lender will want an estimate of value from an appraiser. They will loan based on the appraised value and that has a LOT to do with square footage . And here’s where it gets sticky.
In the MLS (Multiple Listing Services) , and in the Miami-Dade Tax Rolls, the size of a house is OFTEN shown as ADJUSTED SQUARE FEET. What that means is that the air conditioned space is measured and noted … but added to that is a percentage of the garage space and a portion of covered patio and porch spaces as well. That means that the square footage of a property in the tax rolls is shown as being larger than JUST the mere air conditioned area of the home.
Unfortunately, when an appraiser comes in to assess the value of home (for the purposes of you getting a loan), he/she measures and calculates square footage based solely on GROSS LIVING AREA (which means the area “under air” … airconditioned).
When an appraiser measures gross living area, and compares the SUBJECT PROPERTY to the COMPARABLE SALES , he/she needs to compare apples to apples. Value of the SUBJECT which is measured for gross living area cannot be priced and valued properly if the appraiser uses ADJUSTED SQUARE FEET measurements of the comps from the tax roll. Gross living area (which is the airconditioned area that an appraiser looks at) is smaller than the adjusted square footage figures that the MLS and MiamiDade Tax Roll show. And, using comps pulled from the MLS or Miami Dade tax roll (that show adjusted square footage), will result in a lower estimate of value on the SUBJECT PROPERTY, unless the appraiser makes corrections.
Example: (Identical homes on the same block … same floorplan, same size, same age):
House A: 2300 sq ft in the tax rolls (2000 sq ft of GROSS LIVING AREA according to the appraiser) – value according to appraiser: $390,000
House B: 2300 sq ft in the rax rolls … and the appraiser uses the 2300 “size” on this comp to calculate VALUE of the exact same house that is the SUBJECT PROPERTY he/she is appraising. House B house sold for $425,000 last week.
End result: The value of of the SUBJECT is calculated based on incorrect comparison of the actual square footage.
Makes our jobs as Realtors somewhat of a challenge… to say the least.