“My husband and I have been talking to an agent about buying another house. She told me a quick way to figure value is ‘price per square foot’. I’ve never heard of this. How accurate is it?”
Answer:
Here’s how ‘price per square foot’ works:
Take the sales price of a home – say, $500,000. Then divide by the square footage – say, 1,000. That means the house sold for $500,000/1,000 = $500 per square foot.
Average that for several homes in a neighborhood and you can say something intelligent-sounding like “area homes are selling at $480 per square foot”. Simple…fast…easy. One problem though:
It doesn’t work!
By definition, it only includes square footage. That means it leaves out everything else…”unimportant” things like location, lot size, condition, upgrades, age, view, curb appeal, yard, garage, pool, etc.
It amazes me how many intelligent appraisers and agents use such a grossly inaccurate approach to figure out a home’s value. Recently a veteran agent brought me an offer on a home I was selling for a client and insisted it should sell for “$400 per square foot.”
It’s like determining how good a football player is by his weight, and leaving out things like running speed, age, skill, experience, etc.
I’d steer clear of “price per square foot”!
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