Using Price-Per-Square-Foot to Compare Homes When Buying or Looking is Just Plain Wrong

I target Canton Ga homes for sale and in my market, time after time when I first work with a buyer there always seems to be a list in hand that shows price-per-square-foot.  The buyers take the prices on sold homes and then divide the sold price by a home’s square footage to arrive at the price-per-square-foot. Using that means to compare homes when house looking just doesn’t make sense I tell them.

Here is the reason why…

A quick example: House #1 sold for $100,000 with a square footage of 1500. Next you have house 2 that sold for $120,000 and also a square footage of 1500. That is a $20,000 difference, yet both homes had the same exact square footage.

Using the example above, the buyer calculated a $67 square foot price for house #1. He calculates again to derive an $80 price per square foot for house #2. Both calculations are correct only the buyer has unknowingly neglected to take other important factors into play.

When using only the price per square foot as a guide, one fails to consider important factors that determine the home’s true value. One home may have a 2-car garage while the other has a 3 car-garage. That alone could mean a difference in value of up to $5,000 in a formal appraisal.

One home has a tiny yard, the other a gigantic lot. One home may be fully landscaped, while another home has a plain dirt yard. A home has a tile roof, while another has comp shingle.  A home may have expensive hardwood flooring throughout, while other homes has bare basic carpet. Better yet, home #1 has a beautiful mountain view looking out from the back yard, while home #2 has a cement wall and a noisy shopping center looking into its back yard.

The number of bedrooms and baths are also an important factor. You can have the same square footage in two homes, but if one home has an extra bedroom for example, it could increase the value of that home another $4,000 over the home with fewer bedrooms.

Although a real estate broker is not normally a licensed appraiser, you can still look at the differences when comparing homes and pencil in adjustments to the prices on homes sold, or even to homes the buyer may be looking at and considering making an offer on. This will help guide you into making a justified offer price, and present a level of comfort when doing so.