The Square Footage Dilemma
Dilemma: Using Square Footage To Determine Home Value
I like to watch several series on
HGTV. “House
Hunters” is one of them. I like to see the different home values in
different locations across the country. One of the things that always makes me
scratch my head, though, is when they use the price-per-square-foot
calculation.
In the real world of real estate,
no one really does that, at least not when it comes to market value and what
buyers will and have been paying for a home. Builders use price-per-square-foot
calculations for their own purposes, and commercial real estate uses that
statistic to price out properties for rent.
When referring to residential real
estate, comparing home values from one home to another is rarely ever an
apples-to-apples comparison. Determining the market value of a home is a
multi-faceted process. There are several reasons…
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First of all, a home with lots of high-end upgrades is going to command a higher selling price than a similar sized home with basic features. Buyers just aren’t going to pay the same amount for a house that doesn’t have the custom features or upgrades compared to a similar sized home with all the bells and whistles.
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Another reason is that square footage doesn’t always mean that you have that amount of actual floor space. Take for instance, a two-story Colonial =>
To calculate square footage, you take the dimensions of the first floor, and double that amount for the square footage. This traditional Colonial home has about 2000 square feet, 1000 on each level.Now consider a contemporary 2-story house of 2000 square feet…If it has a 2-story foyer or a 2-story great room, like the picture below, it still may have the same 1000 square-foot footprint, the same square footage as the Colonial without the 2 story rooms. The two don’t completely compare.
You might pay more for the dramatic 2-story rooms than
you would for the basic home, depending on the market, even though the basic
home had more actual floor space.This is like comparing apples to oranges. -
A third reason why we shouldn’t rely on the square footage statistic is that it doesn’t take take location into account. Remember that overused cliche: location, location, location. The values in one neighborhood can be driven by completely different metrics than a neighborhood across town, even if the homes are similar. The age of the home, the amenities that the particular builder added and the difference in construction make a difference. The neighborhood amenities and demand also greatly affect the values.
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The last flaw you find when relying on the square foot measurement in direct comparisons is that we often find the tax record is wrong. The tax record doesn’t always reflect any renovations done on the home after the initial sale. And sometimes, its just wrong for no reason at all…garbage in/garbage out.
Buyer Beware
Because mistakes are made, and
human error is always a possibility, buyers should always make it their
responsibility to check the square footage of a home they are
interested in purchasing, and not rely on the owner, the agent, or even the
State tax record.
There are several apps available
to serve the purpose, why not do your own quick measurements
yourself?
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There are several apps for professionals that use a laser measure in conjunction with a calculator to measure for flooring, paint, and to create floor plans for designers.
Count on Your Agent’s CMA – Comparative Market Analysis
Your listing agent or buyer’s
agent will be able to do a custom CMA, by carefully studying comparable homes
that have recently sold and that are currently on the market. This is the best
way to determine fair market value. After that, if the home is being financed,
the bank will require an appraisal, which will be the deciding factor in the
value of the home.
An experienced agent will do a
custom CMA, taking into account all of the various market factors, unique
features and neighborhood nuances. No other valuation can compare for an
accurate measure of what a home is worth in the present market.
If you’re considering selling your
Frederick Md Home, contact the Highland Group regarding our High-Tech,
High-Touch Listing Plan. 301-401-5119
When the economy squeezes us as tight as it has been lately, we can expect it to also put a squeeze on the rest of our lives. Perhaps especially in the comforts of our own home.
