FAQ · 5 min read

Above Grade vs Below Grade Square Footage: What Is the Difference?

The above grade / below grade distinction is one of the most important — and most misunderstood — concepts in residential appraisal. It determines what counts as GLA, how your home compares to others on the market, and how your appraisal will be written.

The simple version

Above grade = finished living space at or above the surrounding ground level.
Below grade = anything underground or partially underground.

Under ANSI Z765 — the standard used by most licensed residential appraisers — only above-grade finished area counts as Gross Living Area (GLA). Below-grade space is measured and reported separately.

Why it matters

When an appraiser selects comparable sales, they compare above-grade GLA to above-grade GLA. Mixing above-grade and below-grade square footage would distort the comparison — a 2,000 sq ft above-grade home with a 1,000 sq ft finished basement is not the same as a 3,000 sq ft above-grade home, even though the total finished area is identical.

Lenders, AMCs, and secondary market investors (Fannie Mae, Freddie Mac) all rely on ANSI-consistent GLA reporting. An appraiser who blends above and below grade into a single number is producing non-conforming output that can trigger review or rejection.

How the grade line is determined

The grade line is the level of the ground immediately adjacent to the exterior walls of the home. A room is above grade only if its finished floor is at or above this line on all sides. If any side of a room's floor level is below the adjacent exterior grade, that room is considered below grade — even if it feels like a normal room from the inside.

Common scenarios

Standard basement: Always below grade, never counted in GLA regardless of finish level.
Walkout basement: Still below grade on the uphill side. Not counted in GLA under ANSI Z765.
Garden-level condo: If the floor is below exterior grade on any side, it is below grade.
Raised foundation home: If the first floor is above the surrounding grade, it is above grade.
Split-level: Each level evaluated individually. The lower level is often partially below grade and must be separated from the above-grade GLA.

What does "above grade" mean?

Above grade means any finished living area where the floor level is at or above the surrounding ground level. A room is above grade if the ground outside is at or below the floor of that room.

What does "below grade" mean?

Below grade means any area where the floor level is below the exterior ground level on any side. Finished basements are the most common example, even if they have windows, walkout doors, or full bathroom finishes.

Does below-grade square footage count for appraisals?

No. Under ANSI Z765, only above-grade finished area is included in Gross Living Area (GLA). Below-grade area is measured and reported separately. It still has value — it just cannot be compared directly to above-grade GLA in paired sales analysis.

What about walkout basements?

A walkout basement is still below grade on the uphill side, even if it has exterior doors and windows on the downhill side. ANSI Z765 requires that finished area be above grade on all sides to count as GLA. A partial walkout does not qualify the space as above-grade.

What about split-level homes?

Split-level homes are the most complicated case. Each level must be evaluated independently. A lower level that is partially or fully below grade on any side is counted as below-grade, even if the main entry is on the upper level. Many appraisers use a room-by-room assessment based on the ground plane around each section of the house.

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