Price per square foot is a real estate concept that is easy to understand but equally easy to misuse. The formula is pretty simple: To determine the price per square foot, you take the house’s sale price and divide it by the house’s square footage.
Price per square foot is useful in looking at broad market comparisons, such as comparing one entire metro area to another or looking at an area’s average change over time. It is not, however, accurate in figuring out the value of your home.
Why? Unfortunately, the price per square foot fails to consider the most important factors when pricing a home.
First and foremost, it makes assumptions about the home’s amenities. We all know the quality of materials used in home construction and the condition of the home’s appliances and other features can dramatically impact a home’s value. A kitchen with Italian marble surfaces versus one with pressboard countertops will have completely different values. Price per square foot in a given neighborhood will blend these homes and produce an average.
Second, the price per square foot assumes locations are identical, but in almost any metro area, there are up-and-coming neighborhoods as well as neighborhoods in decline. Price per square foot near an abandoned industrial zone will vary considerably from one near a well-established downtown district with an excellent walkability score.
Third, even the simple calculation of price per square foot can influence how the total number of square feet has been calculated. If one has a garage converted into an in-law suite, and another home doesn’t, which square footage is valid? And what about the house or lot size? Sometimes above or below-grade lots can influence the price per square foot as well.
One of the things I love about technology is information. Our website offers Market Trends for each of our towns, as well as area subdivisions. The reports outline the number of properties for sale, new listings, days on the market, and average sale prices. Take time to click around and look at different areas; it is quite fascinating.
We also offer information about Price per Square Foot. For example, the average price per square foot in American Ranch in Prescott is $433, the average price per square foot in Forest Trails in Prescott is $352, and Prescott Ridge in Prescott Valley has a per square foot price is $606. (These are prices at the time of publication, click on each area to view the current numbers.)
Resources and Tools
Price per Square Foot helps compare areas, but when it comes time to set a value for your home, we have other tools to help you determine that number.
When valuing a home, we work hard to get an accurate value that considers dozens and dozens of factors. If you would like a real estimation of your home’s value in its current condition and location, we would be happy to help. We have resources and tools available that take into account numerous variables to arrive at an accurate value. Get in touch today, and we will show you what goes into determining the optimal value for your home: (928) 916-1921.