Of course, to get the most useful data, you need to know how to choose which homes to compare to your subject home. Plus, your comps should be about the same age as your subject property. Beyond that, comps should have similar attributes to your subject property — for instance, if the property you have in mind has a pool, so should the comps if possible. And he takes a similar approach for the age of the home. So where do you get the sales price and square footage intel you need to calculate price per square foot?
Some online sources are more reliable than others. So if you use those, you want to make sure these sales actually closed before using the price per square foot data in your own home search. Public records data is not always immediately accessible — but it can be one of the most reliable sources of data for buyers, and should include recorded real estate sales.
Find repositories of public records data online here. Some local multiple listing services — or MLSs — will provide data to the public; check with yours to find out. Real estate brokerages sometimes will print or mail information about homes that sold recently. You might go to local offices to check for such info. Harris suggests that you could also call a title rep and get a property report sent to you — usually free of charge — and give you some data to start with.
And ideally, that person would be local to your specific area. Whissel notes that shows like Million Dollar Listing can create an unbalanced reliance on price per square foot. What we do use square footage for is to find comparable homes that are of similar square footage.
What Whissel does is look at the home more like an appraiser would. The answer is yes and no. Price per square foot should be just another tool in your home search toolbelt. Finally, search for homes with similar attributes. So, how do you find out the listing price and square footage information you need? To begin with, you could simply check some online sources.
Unfortunately, not all of these sources are reliable. For example, many include houses that are still on the market, which can skew the numbers higher. You can also check public records.
This is the most reliable source, but property records are not always available online or easy to use. A local multiple listing service fills a similar role but may or may not be available in your area. Regardless of your location, a real estate agent can be an excellent source. Ideally, this agent should be local.
Read the Blog. Real estate sites will often calculate the price per square foot for you, but what if they don't? How do you figure out the cost or where can you find a calculator? Depending on which side of the transaction you are on, this could be a costly mistake. If you think that making a 50 square foot error in calculating the total square footage of a home is hard to do, then I suggest running several calculations yourself to see how easy it is to make such a large error.
You only need to make a mistake of a few inches here and a few inches there to end up with a significantly different total square footage when talking about an object as large as a house. Even if the error is innocent or a product of differing styles of measurement, using the incorrect total square footage in your calculation can result in many thousands of dollars of difference in price that can work against you when pricing a home. Another variable to consider in the calculation is the price per square foot itself.
Where did this number come from for your calculations? If you looked at comparable sales around the subject home, you can come up with a list of neighborhood prices per square foot. However, all of these numbers will be different and some will vary significantly from each other. How do you know which of these numbers to pick to use in your calculations?
Obviously, most home buyers would want to pick the lowest number and most home sellers would want to pick the highest. If you pick the wrong number, it can cause significant errors in your calculations of price. If you have two homes that you are using as comparison properties for pricing that are the same square footage, then any difference in the price of those two homes can change the calculated price per square foot.
As we have seen above, such a difference in price per square foot can have a significant affect on pricing for the subject home and that can negatively affect a home buyer. So what does all of this mean for valuing a home using price per square foot? In my opinion, it means that you have to be extremely careful when pricing a home using price per square foot because of the inherent possibility for errors in the calculations. An error in measuring the subject home or in the measurement of the comparison homes can lead to a significant change in price per square foot.
How can you verify that all of the square footages of all of the comparison homes are correct? I do not believe that you can. In addition, how do you decide which price per square foot to use when deciding on a price for the subject home?
Do you guess? Do you always pick the lowest number, the highest number, or choose the average number? As we have seen, picking the wrong number with which to make your calculations can have a significant affect on pricing, potentially in a very negative manner for a home buyer or seller.
In fact, I am of the opinion that you should avoid using price per square foot calculations when valuing a home in most situations. I do not think that it is the best way to value a home. It can function as a check and balance against neighborhood comparable sales, but using it as your primary method of computing price can cause you to make a major error in pricing that can equate to thousands of dollars.
I guess you are now wondering what my suggestion is for determining the value and pricing of a home for both home buyers and home sellers. To learn more on that topic, read this article on the 5 Factors of Value to Price a Home. I hope that you have found this post thought-provoking and educational. This is of course a topic open for debate and I would love to get your feedback.
Thanks for reading and be on the lookout for the next article on pricing. Thanks for this great post about price per SF.
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