The key to a successful purchase of a home is the combination of what the seller thinks their home is worth, what the buyer believes the home is worth, and what an appraiser thinks it’s worth. Figuring out any of those three numbers takes some effort, but with the right tools it’s possible to determine the worth of a home.
Price per square foot can be misleading in terms of real estate value, so it’s important to understand how square footage is calculated and how homes are compared. It’s also important to understand there are other factors that can help you consider the cost of your home.
Keep in mind, price per square footage is a helpful tool for comparing homes when they are substantially similar. Overall, this approach doesn’t allow for differences between houses such as brick siding, having a basement (regardless of whether or not it is a finished basement), landscaping, or having a screened porch.
Why Valuing a Home on Square Footage Can Be Confusing
Even though square footage seems like a good way to compare homes, it can be deceptive. Different methods can be used to determine square footage, so it’s entirely possible the homes you want to compare were evaluated differently. In new construction, it’s easy to see why square footage can be up for contention. Some builders measure a home’s size from the outside of the wall framing. Others measure to the outside of siding material. This means that an all-brick home may span more square footage than a house built with lap siding. Differences like this can impact the home’s square footage, and consequentially the price per square foot.
Square footage measurements aren’t necessarily all inclusive, either. Are unfinished attics or basements included? The price of a home where the square footage of unfinished space isn’t included will be less than a home where it is included. Other contenders for being included or excluded from total square footage include garages, porches, patios, or decks. It’s important to know what is included in the square footage of a home. You want to get the most for your money!
Let’s Talk Comparisons
Calculating value on an individual home is more important than a generalized value like what you get with price per square foot. By comparing homes to one another, you’re more likely to get an accurate idea of what a home is worth.
For example, if there are two homes with 2,500 square feet and they’re both several years old, you would compare features. Home 1 has granite countertops in the kitchen and in the bathrooms, hardwood floors, and custom bathrooms. Home 2 has white appliances, carpet on the first floor, and no moldings. If they’re the same square footage, wouldn’t they be priced the same? The differences in the home features make it obvious that it’s misleading to believe the correlation between square footage and list price.
Of course, interior features aren’t the only things you can compare in order to know a home’s value. Location, home improvements, furnishings, updates, and condition are all incredibly relevant to a home’s list price.
Location, Location, Location
They don’t say “location, location, location” in real estate for nothing! However, price per square footage doesn’t take into account location.
Though home improvements, updates, and the like are important, location dramatically impacts value of a home. Think back to Home 1 and Home 2. If Home 1 was located in a lovely part of town equipped with great schools, cultural opportunities, and other amenities, it would increase the value of the home. Home 2 wasn’t located in the best of areas, with mediocre schools and a long commute to employment opportunities. You can bet the price disparity would grow.
Taking a mediocre home and setting it up in the best neighborhood in town will change its value. A home on a back road might sell for something different than a home on a main road. Different school districts impact home value, too. Neighborhood locations are important to note especially if you’re planning to sell your home later down the line.
We’ll Help Get the Price Right
Price per square foot can be a useful tool in determining whether a home is in your budget. There are other
important factors that can help determine if a home is right for you, though. Analyze value in a personal way, with whatever amenities mean the most to you with the help of a real estate professional.
At Real Estate Experts, we’re committed to providing our clients the best experience buying or selling homes. We want the process to be smooth for everyone involved. If you’re interested in buying or selling a home in the Triangle area, give us a call anytime at 919-813-6449 or send us an email to [email protected].