How to judge per sqft rates?

Asked by abhijitz, Dublin, CA Mon Sep 9, 2013

I have been researching for a month now and notice a huge disparity in per sqft rates across any area. True, that premium areas demand higher rates, and other contributing factors would be age, remodel quality/age, overall decor, etc .... what other factors should the first time home buyer look at to determine the rates are not exorbitant.

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9
Valentina Vu…, Agent, Danville, CA
Tue Oct 29, 2013
Pricing a home is not possible if you do not have the recent home sales information .The buyer’s agent should be able to explain and justify the price by looking at the comparable sales in the neighborhood during the recent period of time as well as looking at active similar homes. If you have a home that you are interested in, ask your agent to do the Comparative Market Analysis for that home to see if the price is right. Sometimes homes are overpriced, priced right or underpriced.
0 votes
Annette Law…, Agent, Palm Harbor, FL
Wed Sep 18, 2013
AB,
Good question!
In a nutshell, "If it were easy, anybody could do it!" Like so many situations where there are important variables that have real consequences, many rely on professionals.
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Price/SF is a default that many rely on when that is the only parameter available.
Clearly, this couupled with the age of construction will change the calcultation.
Then adjusted for the qualily or presense of updates.
Further adjustment if there may be waterfront of a great view? Now, is that a $10 or $10,000 linear foot adjustment?
Then there's the one story vs two story adjustment, and 2car vs 3 car, and pool vs grass.
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And of couse, I understand, even fabricated numbers such as those seen on Trulia and Zillow give the unknowing a level of comfort.....although this is a false security.
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If you want to know what the 'real' value is, you best option is to constult with those who assist in buying and selling real estate in that area. This is a case where you are aware there are things you don't know you don't know. And, yes, they can cuase you to make an incorrect assumption and lose the 'one' you've been waiting for.
0 votes
Doug Buenz &…, Agent, Pleasanton, CA
Wed Sep 18, 2013
Great question! Price per sq ft is just one factor in determining value. It would certainly be nice if we could rely solely on price per sq ft to arrive at a fair price, but that would not yield accurate results.

Price per sq ft is influenced by the neighborhood. In general, WITHIN A GIVEN NEIGHBORHOOD, the smaller homes sell for a higher price per sq ft than larger homes. For example, a small single story floor plan will sell for a higher PPSF (price per sq ft) than the largest model, sometimes significantly so. In this case, the neighborhood pulls up the value of the smaller home, and restrains the price of the larger home. If the "neighborhood" is large enough, you can narrow the size of the home and get a more accurate read. But differences in upgrades, lot size, view, etc can skew the results.

This metric loses its relevance when you compare different neighborhoods, as other factors such as schools, commute access, freeway noise, age, etc come into play.

In short, it is one of many factors we use to determine value, but by itself it may not accurately represent market value.

Here is an article on market value: http://www.680homes.com/blog/2012/10/03/waht-is-real-market-value/

Good luck!

Doug Buenz
The 680 Group at Alain Pinel Realtors
(925) 463-2000
680Homes.com
Web Reference:  http://www.680homes.com/
0 votes
Matthew Smith, Agent, Oakland, CA
Wed Sep 18, 2013
This is an analytical approach that can provide guidance when supplemented with additional information. Utilizing price per square foot data from recent comparable *sold* properties facilitates the establishment of a "$/SF" range and mean for a particular area. This price analysis normalizes for individual property differences in square footage. The range characterizes the aggregate local sales pricing for similar properties and all their conditions. Fixers tend to be sold at the lower end of the range, while fully updated properties set the high-end benchmarks. Other factors such as distressed status, atypical lot size or views can also influence pricing for specific properties.
0 votes
Coldwell Ban…, Agent, Ukiah, CA
Tue Sep 10, 2013
I advise my first time buyers to look at price/sf but to make sure they are looking at sold properties! I make sure that I am directing them to Sold comparable properties that are in their search area/neighborhood and help them assess the $/sf based on remodeling/upgrades, quality, age of properties and most importantly area.

Kathy Pomilia
Coldwell Banker Mendo Realty, Inc.
DRE # 01396567
0 votes
James Wehner, Agent, Scottsdale, AZ
Tue Sep 10, 2013
I would focus more on the price comparison with other similar homes then worrying about the price per square foot. Price/ sqft is a good barometer for homes that have similar features, i.e. pool, number of garage parking spaces, same # of stories, remodeled, etc.

If you compare homes that have differing features, your price/ sqft will not be accurate.

Work with a REALTOR who will provide you with comparable sales in the same neighborhood to determine an appropriate offer/ sales price. One safety net you have as a financed buyer is that home will need to pass an appraisal. If the home is overpriced, the appraiser will most likely point this out.
0 votes
JR Thrasher, Agent, San Diego, CA
Tue Sep 10, 2013
A first time buyer or any other buyer looking for a home to live in should not be looking for a price per square foot "rate". You are over analyzing. If a home fits your needs and is priced fairly for the neighborhood it is in then you should buy it.

If you keep over thinking things while interest rates are on the rise you will lose much more value in the cost of interest on your loan than you would by developing your own formula for analysis.

J.R. Thrasher
http://www.SanDiegoRealEstateVeterans.com
619-929-0105
0 votes
Barbara Wils…, Agent, Danville, CA
Mon Sep 9, 2013
You can't use price per square foot comparisons to figure out what to offer for a house.
One house may have all the basic fiinishes, and the house across the street have real hardwood, solid granite, not tiles, a professionally landscaped yard vs. a plain patio, and thus, will obviously sell for vastly different "per square foot" prices. Or one neighborhood may be more desireable due to schools, distance from the freeway, so sell for different prices per square foot. And in a neighborhood of older homes, like westside danville, the land alone is maybe 70% of the value - there are a lot of tear downs because they are on a half acre or more wiithin walking distance to downtown.
You need to find a house by driving through the neighborhoods, figuring our where you feel comfrotable, work with your realtor to reallly define what is important to you ahd to prioritize it, and when you find the house you want, you will know what price YOU are willing to pay for it.
0 votes
Thanks, good information
Flag Mon Sep 9, 2013
John Souerbry, Agent, Fairfield, CA
Mon Sep 9, 2013
View. PPSF ignores the HUGE disparity that a good view provides. PPSF is a fine measure for replacement cost, but is otherwise totally worthless.
0 votes
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