Don’t overem­pha­size a house’s price per square foot

Daily Local News (West Chester, PA) - - BUSINESS - Mau­reen Hughes is the Lead List­ing Spe­cial­ist of The Wayne Megill Real Es­tate Team of Keller Wil­liams Brandy­wine Val­ley in West Ch­ester. For buyer or seller rep­re­sen­ta­tion, or for more per­spec­tive on the lo­cal and na­tional real es­tate mar­ket, please email

When house shop­ping, price per square foot of­ten comes into con­ver­sa­tion. As one of the most fa­mil­iar meth­ods of home com­par­i­son many peo­ple are aware of, it is a com­mon method of mea­sur­ing a prop­erty’s value. This method is so widely used, it is of­ten listed with the sales price on many ap­praisal reports and list­ings. Ev­ery­thing about a home is in­cluded in the price per square foot. Not only does this num­ber con­sider its size, but also its con­di­tion, fea­tures, ameni­ties, etc., and con­sol­i­dates all of this in­for­ma­tion into one num­ber.

Most peo­ple tend to as­so­ciate price per square foot as a pri­mary de­ter­min­ing fac­tor in a home’s value. Un­for­tu­nately, align­ing square footage price on its own with a home’s value be­comes a ter­ri­bly inac­cu­rate and mis­lead­ing way to as­sess value. Many sell­ers falsely as­sume that a higher square footage war­rants a higher price tag, or as­sume lower square footage should have a lower price.

Only cal­cu­lat­ing the re­la­tion­ship be­tween size and sales price ig­nores all the con­sid­er­a­tions a po­ten­tial buyer may make. When com­par­ing two iden­ti­cal prop­er­ties that are iden­ti­cal with the ex­cep­tion of size, then it is as­sumed that the larger home may sell more and war­rants a higher price and there­fore the price per square foot could be an ac­cu­rate scale. But, if we choose two iden­ti­cal homes in terms of size but one has a bet­ter plot of land and there­fore sold for a higher price, the equa­tion fails to be re­li­able. The more dis­sim­i­lar fea­tures, the less re­li­able price per square foot be­comes as a func­tion of in­di­cat­ing value.

A pri­mary con­ver­sa­tion I have with any seller is the ap­pro­pri­ate val­u­a­tion of their home. This may or may not change be­cause of the home’s square footage be­cause many fac­tors play into the value puz­zle. For me, lo­ca­tion, the top pri­or­ity of real es­tate, takes prece­dence first and fore­most. Then, things like fea­tures, fin­ishes, ameni­ties and many

other fac­tors are con­sid­ered, in­clud­ing square footage.

The prob­lem arises when buy­ers and sell­ers com­pare homes in dif­fer­ent lo­ca­tions, us­ing only a price per square foot eval­u­a­tion. It would be sim­i­lar to com­par­ing a Maserati to a Kia – they both have 4 tires – so should they cost the same amount per tire? If we all agree that lo­ca­tion, lo­ca­tion and lo­ca­tion are the 3 most im­por­tant fac­tors of real es­tate, how can we try and as­sign a value us­ing an equa­tion that never con­sid­ers lo­ca­tion?

With all that said, when does price per square foot fit into the equa­tion? I be­lieve it is most use­ful when com­par­ing homes in the same neigh­bor­hood or very close prox­im­ity. It is very help­ful in de­ter­min­ing a value as­so­ci­ated with a lo­ca­tion and in look­ing at homes sold, can give a worth to an area that other­wise might be hard to de­ter­mine.

Mau­reen Hughes On Real Es­tate

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