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.