Hypothetical pricing question. Two houses, same street, same price, not same size.

Asked by Tom, Philadelphia, PA Sun Oct 14, 2007

suppose two houses are on the market for 600k. Same # bedrooms, similar lot size.

Home A is 4500 sq ft has 3 car garage and 3 full baths.

Home B is 2400 sq ft, 2.5 bath, no garage

If you calculate price per sq ft on House A, it comes out to $132. Would it be correct to apply the same approximate price to the other smaller house?

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Answers

11
Jim Walker, Agent, Carmichael, CA
Mon Oct 15, 2007
Tom, Ute Sylvia and I are in California - you, I believe might be near Philadelphia. ---

So these answers are general in nature not specific to your street. --- In my own neighborhood a 4500 square foot house would be much more than $600K ( saw one recently that was asking $725K) and 2400 sq foot house would be far less. ($499K is a popular asking price for that model here)

So the hypotheses of your hypothetical question does not stand. It does not stand on price per square footage either. The larger house is only $161 per foot in my town and the smaller ones are $208 per sq ft.

Home B has no garage! could it be that some of its square footage is from a garage conversion? Not Good!

Even if you slide the scale for smaller sq foot homes selling for more per square foot than larger ones, that scale does not slide so far as to enable an inferior smaller home to ever be worth the same as a superior larger home.

It sounds as if you might be the guy with the inferior home who has to compete with big cheap house. - Because of the huge difference in size you need to have your Realtor look at competing streets and neighborhoods for homes in that 2000 to 2800 square foot range for more pricing guidance. You best guidance may be from recent closed and pending sales.
1 vote
Ute Ferdig, Agent, Auburn, CA
Mon Oct 15, 2007
Hello again. No, I don't think that the two houses should be priced the same. It is very possible that the 4,500 sqft house is priced below market value or the 2,400 sqft house is priced above fair market value. When you come up with a value for each house, you should compare the 2,400 sqft to other houses that have sold in the 2,000 - 2800 sqft range and the 4,500 sqft house to other houses in the 4,000 - 5,000 sqft range. Obviously, if the 4,500 sqft house is offered at the same price as the 2,400 sqft, obviously that would raise some question with potential buyers. Based on what your scenario I would expect the smaller house to be priced at least $125,000 less than the larger house, but a local real estate agent will be able to shed some more light on the correct pricing.
Web Reference:  http://www.theMLShub.com
1 vote
Tom, Home Buyer, Philadelphia, PA
Sat Oct 20, 2007
Thanks for input. I think I got the answer I was looking for.

BTW, I am not the seller in either case. I am looking to buy and trying to find out what a fair market value should be.
0 votes
Jan Wood, , Gallatin, TN
Mon Oct 15, 2007
Thank you, Jim, for answering that question. You get my vote.
0 votes
Tom, Home Buyer, Philadelphia, PA
Mon Oct 15, 2007
I sort of understand, but it sounds like you all feel the list price is possible accurate for both homes.

These homes are comparable, except for size and the garage. Same # of bedrooms, same general condition, approximately the same level of finish, nearly identical lot size. Shouldn't the listing price of the smaller house be significantly less? If not, why? I used price per sq. ft to try to arrive at a comparable price. Is there another method that should be used?

I am in touch with a realtor, I just wanted to get smarter on the subject first.
0 votes
Ute Ferdig, Agent, Auburn, CA
Mon Oct 15, 2007
Hi Tom. The answer is no. The price per square foot for the smaller house will be higher. The higher the square footage is, the lower the price per square foot will be. I would not consider the smaller house a comparable sale for the much larger house even if it's on the same street. When we look for comparable sales and listings, we usually do not go above 20% +/- of the subject property square footage. Ideally, all comparables are within a 10% size range.

You'd also have to make an adjustment to the price because house B does not have a garage which would make it less desirable even if the houses were otherwise equal in size. Value is not just based on square footage and when you adjust sale prices because of differences in size, you don't use the per square foot price as the per squrare foot price also includes the land. Appraisers will use a $50 - $100/sqft price when they make adjustments depending on the quality of construction). Thus, if you compare houses with 2,000 and 2,500 sqft respectively, you'll adjust the price up or down by only about $50/sqft for average construction houses. I hope this helps.
Web Reference:  http://www.theMLShub.com
0 votes
Richard M. J…, , Sherman Oaks, CA
Mon Oct 15, 2007
Hi Tom. I would say no. You cannot compare these two as there different homes. Compare similar homes with Home A and similar homes with Home B. I had a client recently who said to me that if a 4 bedroom home sells for $400K, a 3 bedroom home should sell for $300K. You see what I mean?
0 votes
New Homes Se…, , Arizona
Mon Oct 15, 2007
The quick answer is No. There are too many variables to consider, many of them have already been mentioned.
0 votes
Holly Grigai…, Agent, Cottonwood, AZ
Sun Oct 14, 2007
I agree with Ute. The most expensive parts of construction are the kitchens and baths, plumbing etc.. An Example. You have a home that is say, 60x30.... 3 bedrooms, 2 baths. Say you change your floor plan a little so it is now 60x35. You are only adding a few extra 2x6's, a few more yards of concrete, shingles etc, and you have already spent the money on the expensive parts of the house. That is why a house with more square feet will generally cost less per square foot than a smaller home of similar construction.
0 votes
Sylvia Barry,…, Agent, Marin, CA
Sun Oct 14, 2007
Hi Tom:

Normally, when everything is equal, the price per squar foot goes down with the square footage. Houses fundamentally have the same features, such has living room, dining room, kitchen, bathrooms, landscaping, lot size, location, view etc.

Using two homes, one is 1300 sf, the other is 1100 sf, both priced at $700,000

Price per square footage will be 538.46 for the 1300 sf house, and 636.36 for the 1100 sf close to $100 per square foot difference.

If I use $538.46 (price per sf for the 1300 house) on the 1100 sf, then add an 200 sf addtion at $300 per square foot, the hosue will be $652,306, much less than $700,000 ($538.46*1100 + $300*200)

So some of the cost per square footage gets diluted when the total square footage of the house goes up.

You can not use straight math here or in real estate.

Sylvia
0 votes
David Rivera…, Agent, San Francisco, CA
Sun Oct 14, 2007
Hi Tom,
Based only on the info you've given us, certainly home A would be worth more than home B. However,
we do not have enough info to know this for a fact. Condition of the homes would be the first question I'd want to have answered. One could be updated with granite, stainless, etc. and the other could have foundation problems, for example. My next question would be where on the same street are they located.
Some streets are very, very long. House A could be next to a group home and across the street from a
7-11, which would negatively affect the value. House B could have no rear neighbors and face onto a greenbelt, which would positively affect the value. So, in other words, we here online cannot answer your question as accurately as a local Realtor could.
0 votes
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