Don't be fooled by agents that use price per sq ft (ppsq) to value your home- your home could be worth MORE or LESS based on MANY OTHER factors - When used solely, ppsq does not tell the whole story! If an agent ONLY uses the price per sq foot to get your HOME VALUE, switch agents FAST!! There are so many other factors that come into play!

For example, you might find two identical homes in finish and sq ft, but if they have a different lot size, view, their value would be significantly different. Another example would be two homes with different sq foot but one is updated and the other isn't - One with less sq ft  has more updates might be valued more than the other with more sq ft.

Don't let an agent value your precious investment on a measurement! There is much more to the story than ppsq

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Below is an article written by a professional appraiser that supports this- he sums it up nicely.

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A real estate appraiser’s perspective:  Buying a house based on the price per square foot is like paying for a car based only on its miles per gallon; and yet to this day I see buyers, sellers, mortgage and real estate professionals discussing and using square foot price as a method for comparing homes to try and determine value.

A 2,000 square foot home that sold for $400,000 did technically sell for$200/sf so the appeal is understandable because on the surface price per square foot takes a very complex problem and appears to deliver a simple solution but it is an illusion. Tempting as it is using $200/sf as the basis to determine the value of any other home is fatally flawed because it is what lies below the surface that counts.

Here is why price per square foot is misleading as an indicator of a home’s value.  How much a home is worth ultimately depends on the following list of key characteristics that influence market value of a home.

  1. Location
  2. Lot sizeHome Value Checklist
  3. View
  4. Style
  5. Age
  6. Condition
  7. Quality
  8. Size (square feet)
  9. Floor plan (#Room/#Bed/#Bath)
  10. Parking
  11. Other amenities
  12. Time – When the home sold

You can tweak or argue the completeness of the list but it is the differences in all of the various characteristics which influence the sales price and ultimately the price per square foot.  Ask yourself this; would someone pay more for a home on a quiet tree-lined cul-de-sac than they would pay for the same exact home along a very busy main street?  And since the sale included the lot upon which the house was built, how much of that $200/sf do you think was for the land?

Let us peel back a few layers of the real value problem. Here is a recent real life example of two similar homes that sold recently presented in matched pair format where you can see the same sized house sold for two very different prices per square foot, and it is not difficult to understand why.

Address 70 Hemenway Rd 76 Hemenway Rd
location Not a factor Not a factor
lot Size 0.56 acres 0.59 acres
view Not a factor Not a factor
style Slab Ranch Slab Ranch
age 56 years 56 years
condition significant updates 2009-2010 carpet/paint toilet oven cheap cabinets
quality upgraded K&B  quality inferior/original
square footage 1,440 1,454
Floor Plan 8Rm-3Bd-1.5Ba 7Rm-3Bd-1.5Ba (assessor says 1 bath)
Heat/AC FHW-propane/ CAC FHW-Oil/Wall AC
Parking Driveway Driveway
Other amenities Fireplace/Radiant bath/Patio Fireplace
contract date 11/22/2013 11/12/2013
closing date 12/5/2013 12/17/2013
Sale Price $348,000 $233,000
Price per sf $242 $160
2013 Tax Assessment $282,200 $273,200

 Why the huge difference in the price paid per square foot? These two homes have almost the exact same location, size and bed/ bath utility but there is a difference of $115,000 attributable to the superior condition and quality of the first house.  The other home needed of some repairs and the little bit of updating was of low quality.

I describe appraisers as trained professionals who pretend to buy houses for a living.  There is a skill set which comes from training and experience and there are practices and methodology that are brought to bear on solving the problem of; what is this hose worth?  in the end appraisers mirror the behavior of buyers in the market, and everyone; sellers, buyers, realtors and appraisers are all trying to solve the same problem. What is this house worth today?

Adam Wiener-