You would think that measuring the square footage of your home would be pretty straight forward - get out the tape measure, break the home up into rectangles, and add up the area of the rectangles. Seems logical right? But coming up with a square footage number is kind of like the old joke about the accountant who aces the interview question of how much is 2 + 2 by answering "What would you like it to be?" And, unfortunately, the square footage that is calculated very much depends upon who is doing the measuring and for what purpose.
How The Appraiser Measures Square Footage
Perhaps the most straightforward and logical measurement is the one that appraisers tend to use. They measure the shell of the home to calculate what they call Gross Living Area. For a condo they have no choice but to start with the internal measurements - from the inside of the walls - but they might add on 6 inches for the wall thickness. For a single family home they usually use the outside dimensions, so the thickness of the exterior walls is included. And they only count the space that you can actually live in.
However, even this technique leaves room open for interpretation. What happens if one floor of the home has an area that is open into the floor above it - like a family room or foyer with a 2 story vaulted ceiling? Then clearly the upper floor has less floor space than the lower floor. Frankly, I'm not sure how appraisers would handle this but I suspect that since they are using external shell dimensions they would treat both floors equally. Apparently the Fannie Mae guidelines indicate that this open area should be counted twice - once for each floor. However, there is an ANSI standard Z765-2003 that specifies that this area should only be counted once.
Another subtlety here...for a single family home the Gross Living Area technically does not include the basement or any space even partially below grade, regardless of the level of finishes there. However, the appraiser will separately note the square footage of the basement and explicitly take it into account.
How The Developer Measures Square Footage
Why would I make a point of saying that appraisers only count space that you can actually live in? Because those sleazy developers will count all kinds of space in their square footage measurement for marketing purposes - decks, balconies, terraces, and even garage space. Developers of downtown Chicago high rises built in the last 10 years often included the balconies in their square footage measurements - probably because they are under a roof but certainly because it makes the property look better. The University Village developer included the attached garage space in the square footage calculations of the townhomes. So my 3100 square foot townhome was really more like 2700 square feet.
How The Tax Assessor Measures Square Footage
If you look at the square footage listed in the tax records for single family homes you will see that the basements are not included. It doesn't matter if they are finished or not. For whatever reason they don't include it. They do note whether or not there is a basement and whether or not it is finished so I don't think that their methodology provides any tax advantages to homeowners with finished basements.
How The Realtor Measures Square Footage
Well, typically they don't - measure it that is. They will pick up whatever number is available from the seller or the builder without confirming it. The MLS now requires that they indicate the source of the square footage but the options include "estimated" and "other". But rest assured that the realtor is going to use whatever number is generally used in the development or the neighborhood and will be biased towards a larger number and may even round it up to the nearest 100 sq ft.
An Alternative Way Of Measuring Square Footage
Because square footage numbers are often unavailable and misleading one thing that I and some of my more analytical clients will do is calculate the square footage of each room from the MLS dimensions and add them up to get what I call the livable space. On the one hand this gets you an decent estimate of how much space you actually have to put furniture in and plop yourself into, eliminating wasted space like wall thicknesses and hallways. But on the other hand it ignores things like bathrooms and closets, which are an important feature of homes. The end result of this approach can easily be half of the Gross Living Area.
The Bottom Line
It gets even more complicated but I don't want to make a career out of contemplating square footage measurements. There are rooms with low ceilings and sloping ceilings and adjacent structures that need to be considered.
So what is the bottom line in all this? The unfortunate fact is that you can never be really sure what you have or what you are getting unless you ask a very pointed question: How is that number calculated? You can have some fun watching the real estate agent squirm when you ask them that. They will certainly try to avoid giving you a straight answer but keep poking around until they do. However, there is a decent chance that in the end they will simply tell you that they have no idea who came up with that number or how they did. And if they do give you a direct answer don't believe them unless they seem really confident in their understanding.