Home Buying in 19147>Question Details

Marcy Wagman, Both Buyer and Seller in San Diego, CA

Is it considered OK to make an offer on a home based on the zip code's average price per square foot?

Asked by Marcy Wagman, San Diego, CA Wed Mar 18, 2009

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Erica Ramus, MRE’s answer
There's a lot you need to take into account if you're using this method. You cannot just take the square foot price off trulia or other site. You need to find houses or condos that are really similar, and use those in your analysis. It's harder than it sounds to find good comps. That's what an appraiser does.
What is the house worth to YOU? You can offer the seller anything you want, really! There are no rules as to how you come up with your offer price. The seller can then accept, reject or counteroffer you.
But in the end if you get a mortgage, the house must appraise for what you're willing to pay.
1 vote Thank Flag Link Wed Mar 18, 2009
Hello Marcy!

I will have to agree with the rest of the Advice here...you really can not make an offer based on a rule of thumb figure and here are some things I would say would play a factor in why you can not use a price per sq foot.

1) You need to know what the upgrades to the home have been
2) You need to know what the other homes have sold for in the area that are like this home and did they have upgrades/updates.
3) What features does the home have?
4) Would it work out for the home you are selling to do the sq foot price guide?
5) What community is the home located in?
6) What are the benefits of the location
7) What is the Lot size
8) What are the neighbors like....seriously..cuz if they do not take care of their home....then the value of the one next door will be lowered.

I guess you never know...but I really doubt that this kind of method would work due to some homes being dumps and some homes being in excellent condition etc.
2 votes Thank Flag Link Wed Mar 18, 2009
The square foot method for establishing value in a zip code is full of variables. That method would assume that all homes in that zip code are reasonably similar in age, construction, size of lot, features and finishes. This is usually not the case. This could be a starting point at best. Even condo units within the same building have differences in the views from a particular unit, the features and finishes. What if one unit has not ever been updated while another has renovated with marble or hardwood floors, Miele appliances, granite counters and so forth? The value cannot be a matter of sq ft only.

Now consider that single family homes will have many many more variations than condo units in the same building and you begin to understand that the simple sq ft price in a zip code is very limited in establishing fair market value.
1 vote Thank Flag Link Wed Mar 18, 2009
No. That's like saying my 1000 sq ft townhouse (right next to the train tracks) is worth as much as your 1000 sq ft home right next to the park.

It can't and will never work that way. There's a lot to consider in finding out how much your home MAY be worth.

Terrence Charest, e-Pro
1 vote Thank Flag Link Wed Mar 18, 2009
Sorry, but valuing a home has a LOT more going into the price than it's zip code. Not even the 'best guess' websites out there are that general on how they price homes.

Get in touch with a professional if you need help here.

fyi - the tax appraiser's valuation isn't a good indicator of market value in most areas either. In Gainesville FL it is usually tens of thousands of dollars too low.
1 vote Thank Flag Link Wed Mar 18, 2009
No, is not. A zip code can range from 1/2 mile radius to 10 miles radius depending where you live. And the price per square foot is only a mathematical factor for builders to figure it out how much it will cost to build a house and get profit from it. i.e. a community can have homes that sell for 200K and are plain and simple (carpet, tile, vinyl floor, formica counter tops, 3bedrooms 2 1/2 bathrooms with 1800sqf) and another community about half mile away can have homes in the 350K with all the bells and whistles (granite,hardwood floors, custom cabinets, dimond layout tyle, etc,etc,etc)
1 vote Thank Flag Link Wed Mar 18, 2009
Well, I guess your could! Of course you could also make an offer on a vehicle based on the average cost per inch of length.
0 votes Thank Flag Link Wed Mar 18, 2009
Marcy,

I really like the square foot method of pricing a property. It is best used when you are determining the price to offer for a Condo. Even then, it works best when you are comparing similar condos such as condos in the same building. Condo prices per square foot really is a case of comparing aples to apples so to speak.

I also like to use price per square foot in zipcode to determine what the average price per square foot is but again, only with condos. So in Queen Village or Old City, for example, there are plenty of condos and looking at the average high and low is interesting and informative.

You can break it down by dividing up the current condo sales into a few categories such as 1) new construction condos w/ tax abatements, 2) older condo's with higer condo fees but with a door person or concierge service, 3) highrise condos 4) smaller condo conversions, and so on.

Here are a few littlle rules of thumb:

1) The smaller the condo unit's square footage, the higher price per sq foot you pay.
2) The higher up you are in a condo building the higher the price per sq foot can be as well (not to mention a corner or penthouse unit).
3) Try to compare "like" condos such as my example above using just new construction price per sq foot.


I hope this info helps.
0 votes Thank Flag Link Wed Mar 18, 2009
No. But you are on the right track, Average price per square foot is useful in comparing similar houses. But without professional advice, you could actually wind up listing or offering inaccurate price. Want to talk more, call me direct at 215 266 7227.

Best wishes,

Joe
0 votes Thank Flag Link Wed Mar 18, 2009
It might be insulting to the seller or you might have someone agree instantly and pay way too much for the home. In any given zip code there can be such a wide range of houses, from mountain top estates and lake side villas to unkept hovels and everything in between. It would be better to educate yourself on the market and neighborhood that you desire ,and then ask you realtor for their imput before making an offer.
0 votes Thank Flag Link Wed Mar 18, 2009
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