Price per square foot is a concept in real estate which is easy to understand and just as easy to misuse. The formula is pretty simple: To determine price per square foot, you take a price, such as sale price of a home, and divide it by the square footage of the property.
Price per square foot is useful in looking at broad market comparisons, such as comparing one entire metro area to another, or looking at an area’s average change over time. It is not, however, terribly accurate in figuring out the value of your home.
Why? Well, price per square foot fails to take into account the most important factors when pricing a home.
First and foremost, it makes assumptions about the home’s amenities. We all know the quality of materials used in home construction and the condition of the home’s appliances and other features can have a dramatic impact on the value of a home. A kitchen with Italian marble surfaces versus one with pressboard countertops will have completely different values. Price per square foot in a given neighborhood will blend these homes together and produce an average.
Second, price per square foot assumes locations are identical, but in almost any metro area there are up-and-coming neighborhoods as well as neighborhoods in decline. Price per square foot near an abandoned industrial zone will vary considerably from one near a well-established downtown district with a great walkability score.
Third, even the simple methodology of calculating price per square foot can be influenced by how the total number of square feet has been calculated. If one has a garage converted into a mother-in-law, and another home doesn’t, which square footage is valid? And what about home or lot size? Sometimes above or below-grade lots can influence the price per square foot as well.
Price per square foot is more useful in commercial situations where there is tremendous uniformity in the design, construction, and location, but as a tool for assessing your home’s market value, it’s flat out dangerous.
Want a real estimation of your home’s value in its current condition and location? I’d be happy to help. Get in touch today, and I’ll show you what goes into determining the optimal price for your home.
Welcome to your one-stop source for real estate services covering the entire Dayton area from our 2 locations, Centerville, and Fairborn! Realty Central represents over 100 years of experience with expertise in all aspects of real estate. From buying and selling homes in the Dayton area, to property management, to short sales, HUD homes, and foreclosures, each of our Dayton Realtors has a unique specialty that can serve your real estate needs. We want your business; and with our high-touch service combined with the very best in technical and Internet marketing, we deliver results! Call us and let’s talk about how we can help you! 937-938-8931.
The run-up to an open house is as important as the event itself.
"Amy was very knowledgeable and helpful throughout the whole purchasing process. She was very prompt in answering all our questions. As out of state buyers we relied on Amy to handle all the transactions. She went out of her way to ensure that the purchase was seamless and I would highly recommend her to anyone buying or selling their home.