I got a big shock this week: An appraisal for one of my buyer clients came in $40,000 under the contract price.
Was the house overvalued? Not in my opinion. It’s a vintage home in picture-perfect condition on a flat lot of about 10,000 square feet, surrounded by more than 70 mature trees. Basically, the kind of mountain property postcards are made for. The MLS comparables supported the price, the listing agent landed in roughly the same place I did, and yet the appraisal did not.
So, what happened?
Part of the answer is square footage, and this is where mountain homes can get especially interesting. Fannie Mae has required use of the ANSI Z765-2021 measurement standard for applicable appraisals since 2022, so ANSI itself is not new. What is changing is the appraisal reporting system. Beginning Nov. 2, 2026, Fannie Mae and Freddie Mac will require the new UAD 3.6 appraisal format for new reports submitted through their system, bringing more detailed and standardized property reporting.
And apparently, November has arrived early in some corners of the lending world.
Some lenders and appraisal management channels are already transitioning to the new reporting requirements ahead of the mandatory date. That appears to be what we encountered. Our appraisal included a two-page addendum explaining and justifying how the home was measured and reported, along with a sketch showing the portions of the house excluded from finished square footage shaded in gray. Nothing says “welcome home” quite like watching part of your bedroom turn gray on an appraisal sketch.
That matters here because ANSI treats sloped-ceiling space differently than many homeowners, agents and even public records do. In a room with a sloped ceiling, at least half of the finished area must have a ceiling height of seven feet or more, and space below five feet cannot be counted as finished square footage. If the room doesn’t meet the standard, it may have to be reported separately as nonstandard finished area.
Hello, A-frames.
In my buyer’s transaction, 143 square feet disappeared from the home’s reported finished area for appraisal purposes. At roughly $285 to $310 per square foot based on the local comparables, that represents about $40,755 to $44,330 if someone simply applies that range to those lost square feet. Suddenly, a $40,000 appraisal gap looks a lot less mysterious.
To be clear, that doesn’t mean the space has no market value. Fannie Mae allows appraisers to recognize market reaction to nonstandard finished areas. But it does mean the same house can have one square-footage number in public records, another in the MLS, and another under appraisal measurement standards. Because apparently buying a mountain house wasn’t complicated enough.
UAD 3.6 also brings more detailed reporting of condition, defects, damages and deficiencies. That doesn’t mean every aging roof or squeaky stair will automatically trigger repairs, but it does mean agents, buyers and sellers should expect greater scrutiny and documentation of a property’s physical characteristics.
For mountain real estate, that matters. Our quirky architecture is part of what makes these homes wonderful. Unfortunately, the paperwork may not always love the house quite as much as the buyer does.
Theresa Grant is a real estate broker and columnist covering Lake Arrowhead, Crestline, Running Springs, and the surrounding mountain communities. Reach her at (909) 442-1345 visit www.HomesInLakeArrowhead.com, and follow her on social media @TheresaGrantRealtor. Theresa is a Broker Associate with REAL Broker Technologies. DRE#01202881.
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