Dian Hymer takes on the question of square footage.
I’ve heard that square footage is the number one reason a home Seller gets sued by the Buyer and I believe it.
If the Seller says a home has 2,000 square feet and after the Buyer moves in he finds out it has 1,750 square feet, the Seller might have a lawsuit on his hands.
County Assessor’s estimate of square footage
The safest way to go is to use the square footage the Maricopa County Assessor has on record. Then it’s not the Seller saying the home has 2,000 square feet, its the County Assessor.
That usually works well. The problem is that the County Assessor number is often too low.
Builder gives assessor wrong square footage
When a new home is built that has included an option to add a room or otherwise add square footage, the builder will often just tell the Assessor that the home has the base square footage. The owner probably won’t find out and even if they do, they may not want to correct it because correcting it will increase their property taxes. (I don’t even know if you can correct the Maricopa County Assessor’s estimate. You may have to get a building permit after the addition is built.)
Additions built without city permits
A more common scenario is where additions were made to the home without building permits. When you get building permits, the Assessor normally adjusts the square footage (and taxes). If Harry Homemaker encloses the carport to add a bedroom, the Assessor won’t pick that up.
Now, that brings up a lot of issues. If the addition wasn’t done with a permit, it may not have been built to code. A Buyer would at least want his home inspector to pay special attention to such an addition to see if there are any obvious deficiencies. The Buyer should realize that he may have trouble selling the home later on because of the un-permitted addition.
Appraiser’s estimate of square footage
What do you do when the County Assessor’s number is way too low? The most common solution is to use the square footage estimate from an appraiser. In this case the Seller is saying, “A licensed appraiser said it has 2,000 square feet.”
There is no official way to measure the square footage of a home. The number the Assessor has will usually be different than the number an appraiser will estimate. And the appraiser number is usually larger than the Assessor number. So you sometimes see Seller’s use an appraiser’s square footage because it is a bit larger than the Assessor’s number.
If you use an appraiser’s estimate, you have to have the appraisal… printed out… on paper. It can’t be what you “remember” an appraisal saying. If you don’t have the appraisal in writing, it is just you, the Seller, making a promise to the Buyer about the size of the home with no safety net. If the new owner finds your number is significantly too high, you might have to bring out the checkbook to reimburse the new owner for the difference in square footage.
(”Your Honor, I paid $400,000 for that home that the Seller said had 2,000 square feet. That’s $200 per square foot. However, it turns out the home only has 1,750 square feet. Therefore at $200 per square foot the home is only worth $350,000. The Seller owes me $50,000.”)
The Seller could also get into this scenario if he didn’t disclose to the Buyer that an addition was build without permits. (”Your Honor, the Seller said the home had 2,000 square feet but the 250 square foot addition was built without permits, therefore I want some money back.”)
Protect yourself with the SPDS
If the Seller, however, disclosed in the Seller Property Disclosure Statement that the addition was built without permits then the Buyer would have had the accurate information he needs to decide whether to move forward with the purchase… and he couldn’t come back and say he didn’t know the addition was built without permits.
Bottom Line
The bottom line is that when giving square footage, you should use the County Assessor’s estimate if it is reasonably accurate. If not, use an appraiser’s estimate.
I would NOT want a home Seller to just state the square footage from his own measurements. The Seller needs backup from the Assessor or a licensed appraiser, otherwise the Seller is just asking for trouble.
3 responses so far ↓
1 Philip Rosenberg // Jun 25, 2007 at 10:48 am
What an excellent article. In so far as the “Your Honor” comments, I see the seller as having a responsibility to “disclose”, and the buyer having a RESPONSIBILITY to inspect and investigate. In fact our AAR Purchase contract warns the buyer in BOLD TYPE that if square footage is material to the buyer, the buyer should investigate that item.
In a rational world, I think the only time a seller should be found “guilty” of not revealing accurate square footage are those times where the seller deliberately MISLED the Buyer. (Of course, we rarely live in a rational world.) The buyer is buying a house, not an engineered measuring device.
Last, when working with buyers and they inquire about the square footage, and they always do, I emphasize that indeed, there is no “standard” in measuring a house, and that they should feel comfortable with the “Living Space” as it exists, not the square footage as listed in the MLS.
Cheers
2 John L. Wake - Realtor // Jun 25, 2007 at 11:16 am
Philip,
I’m glad you mentioned the AAR Purchase Contract.
Line 195-197 reads;
“Square Footage: BUYER IS AWARE THAT ANY REFERENCE TO THE SQUARE FOOTAGE OF THE PREMISES, BOTH THE REAL PROPERTY (LAND) AND IMPROVEMENTS THEREON, IS APPROXIMATE. IF SQUARE FOOTAGE IS A MATERIAL MATTER TO THE BUYER, IT MUST BE INVESTIGATED DURING THE INSPECTION PERIOD.”
That language puts more responsibility on the Buyer than the previous contract to be sure. (This contract has been used since 2005.)
Nevertheless, it’s such a contentious issue that I don’t think I would take a listing unless the Seller agreed to use either the Assessor estimate or a documented appraisal square footage.
I get real nervous if the Seller says the Assessor is wrong (not uncommon) but he doesn’t have a written appraisal (not uncommon), so he wants to use his estimate of the square footage in the MLS.
3 Philip Rosenberg // Jun 25, 2007 at 8:16 pm
The first writer mentioned the encloser of carports without a permit adds square footage the homeowner would want to put in. I run across this in the lower incomme neighborhoods I service every day. I would take the listing, but now that both of you have pointed out the pit falls, I would MAKE SURE the addition was properly noted in the SPDS.
What few buyers and possibly few realtors know, is that the city could require an unpermitted addition to be torn down, whether it meets current code or not. If you are representing a buyer and notice an unpermitted additon I would a) call the city anonomously and confirm that unpermitted additions can be forced down, then b) warn my client in writing about that and having them sign off on it.
Philip
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