Market Conditions in 37128>Question Details

John, Home Buyer in Murfreesboro, TN

How much should I pay per square foot?

Asked by John, Murfreesboro, TN Mon Feb 22, 2010

Some people in the neighborhood that I am looking to purchase in have paid well over $100/sq foot. This is above the Murfreesboro average from what I can tell. The neighborhood is St. Andrews Place Section 5. If I pay $100/sq foot, am I paying too much, like all of my neighbors? Or should I base my comps solely on the neighborhood I am buying in?

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Answers

7
John – very much so and it’s prudent that you are ‘trusting your gut’ and investigating this kind of information before you make purchase. At the sales prices you are seeing from the surrounding new homes, are they receiving g more upgrades than the home you are involved with?

For instance, is the builder able to undercut the previous homebuyers (now the surrounding homeowners) by offering more space, nicer cabinetry throughout the home, or more closing costs in his current sales promotions?

Many times we hear the other side is selling below purchase price and think “we must be getting a deal” but you may want to know ‘what you get for the money’ because that will be your competition when you are ready to sell. Take a closer look at the builder’s offering, at the recent sales (particularly the builder’s concessions), and ‘back out’ what that means for your target home. Also, your area is selling well with less than 90 days of available homes in your neighborhood and just over 3.5 months of available homes in the surrounding community; so getting anything under market value should be a great opportunity.

Hopefully, you are able to confirm that you are still getting a great value. Are you looking at closer to 2,500 sq ft, or 1,500 sq ft?

Kevin Pellatiro
Hoping to help you take advantage of the market – when you are ready.
(615)714-7918 | kpellatiro@realtracs.com
0 votes Thank Flag Link Tue Feb 23, 2010
John:

This is a good question, and not easily answered without knowing more. But, I will do what I can. I work and live in 37128. A quick list of activity over the last six months in this neighborhood shows an average sale price under $100 per sq ft. However, it may depend on the size of the home, as well. The data suggests that smaller homes in the neighborhood may be be able to command $100+ per aq ft. This is a fairly common situation. Smaller homes in areas with larger homes, often carry a higher per sq ft estimated value. Conversely, the larger homes in a neighborhood may carry considerably less per ft. You may have heard an old adage to not buy the biggest home in the subdivision. This is likely the root of that (often misinformed) piece of advice.

For St. Andrews Pl - if the home you are inquiring about is under 1400/1500 sq ft, then it is entirely likely a fair market value can be estimated at over $100psf. At sizes 1600 sq ft and up, it could be a little high.

PLEASE NOTE - I AM NOT PROPERLY AWARE OF THE EXACT HOME, IT'S CONDITION, OR OTHER TERMS OF THE OFFER/CONTRACT. IF YOU ARE UTILIZING A BUYER'S REPRESENTATIVE, PLEASE REFER TO HIM/HER TO GATHER THE ADDITIONAL INFORMATION YOU NEED. If you are not utilizing your own buyer's representation, I will be happy to help you if you choose. Good luck!
Web Reference: http://www.MyAgentDavid.com
0 votes Thank Flag Link Mon Feb 22, 2010
Thanks for the advice - I will say, this is a new neighborhood where for the most part, only new construction is going on. Other than sq. feet, most of the factors are pretty constant. For instance, all of the homes have brick fronts and vinyl siding. All of the streets are quiet... and so on.

I happen to be purchasing a resale in the neighborhood that has only been occupied for 8 months because the owner is being relocated. The house is listed for 10k below their purchase price, and our final offer is 5k below that.

My fear is that everyone is pumped about the new construction, are overpaying for upgrades, and when the neighborhood is done, prices will drop as the dust settles.

Though it 'appears' that I'm getting a deal based on the recent purchase price of the home, I guess I'm worried that EVERYONE is overpaying. Is this a valid concern?
0 votes Thank Flag Link Mon Feb 22, 2010
It s dangerous tool all alone, but in context it can keep you from overspending on your purchase. If the condition and size of the homes are VERY similar - huge assumption for a simpler answer - you want to pay less per foot than average for your neighborhood (in some cases your community). Also, you’ll hopefully have more than one sale at a higher price per foot AND more than one sale at a higher overall sales price in your neighborhood. In the case of a recent client, they paid less than all 14 sales in their Murfreesboro neighborhood, for a similar (good) condition home.

This may help protect your price (read: your money) if the market gets worse, and ideally means actual cash (not just covering your sales cost) if it comes time to sell in an improved market. Did that help answer your question though?

Kevin Pellatiro
Hoping to help you take advantage of the market – when you are ready.
(615)714-7918 | kpellatiro@realtracs.com
0 votes Thank Flag Link Mon Feb 22, 2010
Scott and Dan are correct. Actually, the whole concept of price per square foot is a misunderstanding/misapplication of construction costs applied incorrectly to presumed home values.

In other words: It may make sense to say that new construction (or a rehab) will cost $x per square foot. Even that's a crude measure. Your cost per square foot will be far greater for a kitchen than for a bedroom. So you're already dealing with broad averages. It's not ideal even for rehabs. Still, OK, it's done.

But it's totally misapplied when used for home values. First, you're not constructing anything new. Second, as Scott and Dan observe, one house may be built or rehabbed to much higher standards. Third, cost per square foot doesn't take into consideration lot size, the usability and people-flow of the interior of the home, home placement, presence of lack of items such as a garage or pool, amount of road noise, whether the home is on a cul-de-sac or street corner, and on and on.

It's like talking about miles-per-gallon for cars. It's not a precise figure to begin with, since the number can vary depending on driving behavior, highway versus street travel, traffic congestion, and so on. But then, if you were to say that a car with a higher mph is more affordable--without taking into consideration purchase price, depreciation, durability of the car, likelihood of repairs, and so on--wouldn't make much sense. It'd be a misuse of the concept of miles-per-gallon.

Same with cost per square foot.

Find out what the comps are. The comps will take into account square footage, lot size, number of bedrooms and baths, age, location, and so on. Those are relevant to the home's value. Then pay no more than the comps suggest. Your offer probably should be less.

Hope that helps.
0 votes Thank Flag Link Mon Feb 22, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Square feet are not practical. They are harder to walk on.

If you are looking at a house that is almost a tear down you do not pay what a perfect new house would go for.

If you are looking at a house with walnut, mahogany, marble, and granite in it you do not pay the same as for a house with no trim and a true plywood sideboard.

Base your offer on comps and then offer LESS.

Below is a housing price predictor website. It appears prices will drop in TN.
http://www.housingpredictor.com/tennessee.html
0 votes Thank Flag Link Mon Feb 22, 2010
You cant really base your purchase on a price per square foot,l it doesnt take into consideration the condition, age of roof, furnace, electric, plumbing or upgrades such as granite, ceramic tile, hardwood, a fireplace, finished basement, garage or the value of teh lot, larger or smaller, flat, hilly, wet, dry etc. So there is much mor eto consider, you really need to garner the value in todays market by getting a broker price oppinion or appraisal so you know what the market valu eis so you can base your offer on that. good luck with your offer.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Mon Feb 22, 2010
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