The agent says one thing and the appraiser says another. Take a look at the image below and ask yourself if this is a 2-bed/1-bath house or a 3-bed/2-bath house. It was marketed as a 3/2, but the appraiser said it was a 2/1.
Does the addition count or not? The example above shows a 2 bed / 1 bath house at 950 square feet, but there is also a “studio” addition that has an extra bedroom and bathroom and is 240 square feet. Does this mean the house is now 1190 square feet with 3 beds and 2 baths? A property can be marketed as such, but the problem is the addition cannot technically be considered as living area because it does not have direct access to the house. To be counted as gross living area (square footage), the addition at minimum needs to be connected to the house and also accessible through the house. If you have to exit the main living area to enter a separate structure, it really isn’t proper to include the area as part of the living space of the house according to ANSI standards (“ANSI” stands for “American National Standards Institute”). The same holds true with a detached in-laws quarters or any detached structure. In this case, the appraiser should not lump the addition above in the square footage of the main house because the house is really a 2-bed/1-bath with 950 square feet instead of a 3-bed/2-bath with 1190 square feet.
The silver lining: It can be really disappointing to a home owner or real estate agent when an addition like this is not included as living space, but the good news is an addition may very well still contribute to value in the appraisal report. Just because it cannot be included in the square footage or bed/bath count does not mean it cannot contribute to value in the appraisal report. Of course the appraiser will consider whether the addition was permitted and also if it has a decent and similar quality compared to the rest of the house (additions can sometimes be shoddy). How much is the market willing to pay for the extra studio? That is the question the appraiser is going to have to ask and then support in the final opinion of value.
Questions: Is it best to market a property like this as a 3/2 or 2/1? If you are a real estate agent, what square footage would you put in MLS?
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