Why You Can Go Terribly Wrong using Price Per Square Footage to Determine a House Value
Recently, I've gotten several people ask me what I thought their home was worth. Usually I here something like this, "Bob just sold his home for X and he only has 2000 square feet. I've got 2500, so mine should sell for Y, right?"
Sorry, but home values don't work quite that way. If you're trying to determine your house's value by comparing the square footage of others that have sold in your area, then you could be off by a lot!
First thing about square footage values is that it is location-based. That is, home values per a footage price will only remain similar if they are in the same neighborhood or very close to the subject property. If you get out of the area, the per footage value may change. We can all agree that a property in a crime-ridden neighborhood would have a lower per footage value than a house in an upscale, gated community, right?
Even if you're comparing homes within the same neighborhood, there are lot's of other factors to consider other than square footage. For instance, not all square footage is valued the same.
Unheated square footage isn't the same as heated square space. Then their is finished vs. unfinished. A basement's square footage isn't given the same value, whether it's heated/finished or not, as the main level. The square footage of the second story of two story home isn't valued the same as the main level.
Finally, you have to compare the age of the homes. Not only the actual physical ages, but also the 'perceived' age of the property as well. For example, is one home fully upgraded with new appliances, flooring, etc where the other is not? Was one not as well cared for and has a few dings and needed repairs? It makes a difference.
There are several factors that determine a home's value and the price per square foot is only a small factor in the process.
Location, acreage, age, style, amenities...these are just a few that also must be considered when you're trying to place a value on a home.
photo courtesy of wwarby flickr photostream