Question:
“My home is in North Park and it’s 3,400 square feet. The average price per square foot in the neighborhood…”
Answer:
Whoa! Stop! Halt!
Before you go any further, I want to save you some time and trouble and correct your faulty premise.
Many real estate agents, appraisers, and homeowners too clever for their own good use “price per square foot” (PPSF) to determine the value of residential homes.
However, using PPSF is an absurd and completely invalid way to determine a home’s value.
It’s like using height as a measure of a basketball player’s skill.
Sure, if you’ve ever watched an NBA game, you know those guys are TALL, so height must be important. But judging a player’s skill by height alone ignores everything else: shooting, dribbling, passing, defense, knowing plays, cardiovascular condition, etc.
In the same way, PPSF leaves out location, condition, style, lot size, view, curb appeal, garage, staging, etc.
And because it only considers the size, the PPSF “method” tends to understate the value of small homes and overstate the value of large homes.
Given all this, why do so many agents and appraisers use PPSF?
There could be several reasons, including:
- They don’t know any better
- They’re trying to impress their clients by using that scary thing called MATH
- They’re using it to justify a certain price
Hopefully someday PPSF will be dropped from appraisals and agents’ analyses.
But until then, many people will be misinformed about the value of homes.
At least YOU won’t be fooled!
