How To Use Price Per Square Foot When Valuing A Home

They say that a little knowledge is a dangerous thing, and this is very true when it comes to determining values in the housing market

They say that a little knowledge is a dangerous thing, and this is very true when it comes to determining values in the housing market.

One effective way to track home values in the real estate market is to track the median price per square foot over time, but this useful information, in the hands of the ignorant, often leads to a loss of money for people trying to sell a home.

Today's post is the answer to a frequently asked question: "How do you use price per square foot when valuing a home?"

Price Per Square Foot Defined

The term "price per square foot" is something builders, Realtors, and appraisers use as a foundation in home valuation. Unfortunately, it is often misunderstood and leads home sellers to mistakes in their initial asking price.

If you price a home too high, you eliminate a segment of the pool of homebuyers who might be interested in your home. If you price a home too low, you might leave money on the table. The key is to choose the right asking price, and we can determine that price with an analysis that includes (but is not limited to) the measurement of price per square foot.

Price Per Square Foot Measurements

There are two common ways to calculate the price per square foot of a home. The first method involves dividing a home's sales price by the total square footage of the home, while the second (and better) method involves dividing a home's sales price by the total heated and cooled square footage of the home. Real estate agents and appraisers often prefer the second method as it focuses on the livable space in a home.

Most of the home valuation apps on the internet (like the best one here or like the Zillow Zestimate) estimate a home's value by measuring the price per square foot of nearby homes, establishing an average, and then multiplying it by the subject home's square footage. Basically, the tools determine an area value and then apply that value to all homes in the area.

Unfortunately, this simplistic method is almost always wrong. Here's an example of why:

If your neighborhood has an average home price of $500,000 and an average home size of 2,000 square feet, then your neighborhood has an average value of $250 per square foot. Say your home is 2,200 square feet of heated and cooled space, then many real estate agents and online valuation tools will tell you that your home is worth (2200 x 250)= $550,000. But there is a huge flaw in the logic behind this formula!

Wanna Know Why Most Real Estate Marketing Plans Don't Work?

Realtor at work in TallahasseeBecause most real estate agents don't work a plan!

With roughly half the listings in the Tallahassee MLS failing to sell during their initial listing period, you have to wonder if real estate agents are lazy or if they are ignorant.

Who would you rather hire, somebody too lazy to market your home EVERY DAY, or somebody who does not realize that daily marketing is essential?

If neither of those options appeals to you, let us know by making contact with us below. We'll take it from there!

How Price Per Square Foot Fails

If all else is equal, the price per square foot method is an accurate way to value homes. Unfortunately, it is very rare when all things are equal between two homes. Here's where they are major differences that affect the valuations of homes. When considering the two homes used as an example above, I would want to know several other factors:

  • Frontage: Are they both on similar lots? In many Tallahassee neighborhoods, there are beautiful lakes. The homes on the lake sell at a higher price per square foot than homes not on the lake. The same can be found in golf course neighborhoods and neighborhoods that back up to busy streets. The value of the dirt is different throughout a neighborhood. And here's a final thought on the land underneath a home. If you use the average price per square foot approach to home valuation, two homes out in the country could be grossly misvalued. Imagine a 2,000-square-foot home on an acre versus a 2,000-square-foot home on 100 acres. Many models would give them a similar valuation.
  • Maintenance: Are they maintained similarly? Or has one home been recently updated, and the other is sporting 1970s shag green carpet? As anybody who watches HGTV, the home's condition matters a lot. Does one have a newer HVAC system? A newer roof?
  • Grand Amenities: Homes with swimming pools are a great example in Tallahassee. But so too are homes with tennis courts, movie theaters, extra garages, etc. How does adding a pool change the square footage of a home? It doesn't! Does that mean a pool adds no value to the home?
  • Source Of The Square Footage Measurement: Different areas have different norms, but square footage calculations in Tallahassee typically come from a recent appraisal or the Property Tax Appraiser's online portal. If there is no appraisal, and the home has not been sold in recent years, the square footage might have changed. Imagine using the square footage from the tax rolls on a home with an owner who has doubled its size. The online tools will not likely know about the size change and will grossly undervalue a home. This is often seen in neighborhoods where people buy to renovate, and many valuation tools fail to recognize that the average home size in the neighborhood has grown!

These are essential factors in a valuation, and it's why online tools miss the mark.

A home's value is impacted more by the features that it contains than by its raw size. Buyers are often concerned with the number of bedrooms, so a 4-bedroom home at 1,950 square feet is often valued higher by buyers than a 3-bedroom home at 2,000 square feet in the same area. Generally speaking, larger homes are worth more than smaller homes, but the features each home contains and the home's condition are important too.

Other Industries

You don't buy a car by the pound (mileage and condition matter most when comparing same-year models). Boats aren't sold by the square foot, nor are the shares of publicly traded companies sold by the amount of space the company uses. In real estate, price per square foot is a great way to estimate how values are collectively changing, but there are too many variables for price per square foot to be effective in determining the value of a specific home.

Accurate Home Valuation

If you want to know what your home is worth, you need an experienced, active real estate listing agent to walk through your home and prepare an accurate valuation. Beware of real estate agents who give you a valuation purely on a price-per-square-foot formula.

You want them to consider the entirety of your home's value, not a rule-of-thumb estimation. Don't rely on websites that pin a value on your home's size, and make sure your property tax assessment of size is either accurate or not used at all.

If you want more information on home valuations in Tallahassee, whether selling, buying, or both, give us a call at (850) 366-8917 or drop us a note, and we will be in touch right away.

How To EASILY Sell Your House For More Money
The Odd, Counterintuitive Plan - What if I told you that to sell your home for the highest price, you need to price it lower than what you think it's worth?
6 Tips For Selling A Home In 2024
This ain't your grandpa's real estate market, the process for selling a home and getting top dollar have changed so much. It starts with knowing the best way to sell your house. There are home selling tips and tricks you can use.
9 Mistakes to Avoid When Selling Your Home
Selling your home in Tallahassee can be daunting, especially if you're doing it for the first time in more than five years. Do This ...
8 Red Flags Warn Against Unscrupulous Real Estate Agents
When interviewing agents for listing your home, it's important to be cautious of those who might not have your best interests at heart.
6 Real Estate Contract Terms You Should Not Overlook
Buying a house is more than just picking the right place—it's about nailing the details with a real estate contract that can make or break your experience.
What Sellers Need To Know About Robo-Offers In Real Estate
Robo offers in real estate are transforming the traditional home selling process, bringing both opportunities and challenges for sellers.
The Truth About Seller Fatigue: It Costs You 6 Ways
Are you thinking about selling your home? Beware of seller fatigue, a persistent issue that can negatively impact your sale in today’s digital market.
Watch: This Expert Shares Ironclad Home Selling Plan For FSBOs
This video, presented by an experienced real estate broker with over 30 years in the industry, offers an in-depth guide for homeowners interested in selling their property without the aid of a real estate agent.
Should you sell your home or rent it out?
If you're gearing up to relocate, your instinct might be to sell and capitalize on the rising home values. But what if there's an opportunity you haven't considered?
Sellers: Get The Most $ For Your Home
Understand real estate pre-marketing, why it works, and how to sell your house for the MOST MONEY POSSIBLE. Top Tips - Get ready to learn how to sell your house because with pre-marketing in real estate, you can sell a house fast for more money!
Your Home Failed To Sell, Now What?
What to do if your home failed to sell. When your "selling a home process" fails, it's time to start thinking about what to do next.
Top 7 Ways To Market Your Home For Sale Using Technology
Technology has opened up a world of possibilities for homeowners looking to market their property and attract potential buyers. In this video, we'll be sharing the top 7 ways to use technology to market your home for sale.
7 Critical Stages In Selling Your Home
The process for selling a home has changed greatly since the world went digital, but now after a historic sellers' market, today's home selling plan requires adjustments compared to the last few years.
How To Sell Your House When You Are In A Hurry
Would you like to know how to sell your home fast without losing out on your hard-earned equity?
I Asked An AI Why Real Estate Agents Ask Sellers For Price Reductions
If your real estate agent has recommended that you reduce your asking price, there could be several reasons for this suggestion.
Pre-Marketing: Win the Home Selling Race
Are you looking to sell your home for the most money possible in today's fast-paced and competitive real estate market? Then you must consider pre-marketing strategies.
12 Home Selling Tips For Retirees - Sell Home In Retirement
If you are retired (or soon to be retired) and plan on selling your home, we've shared 12 tips than many happy retirees relied upon when selling a home.
How To Avoid Common Legal Issues When Buying Or Selling A Home
This video examines the most common real estate law problems and provides guidance on avoiding legal issues when buying or selling a home.
Selling A Home In A Strong Sellers Market | AVOID This MISTAKE!
If you are getting ready to sell a home, you must avoid making a horrible mistake that I'm seeing every single day. As we continue in the midst of the strongest seller's market on record, one might assume that a home seller can do no wrong.
How To Use Price Per Square Foot When Valuing A Home
Price per square foot is a measurement of a home's value, but the price per square foot alone is not an effective way to determine the price a home will sell in today's housing market.
Leveraging Seller Financing to Expand Market Opportunities
Owner financing explained, also known as seller financing or seller carryback, is a creative alternative to traditional mortgage financing for real estate.
Biggest Change In Selling A Home Since The Printing Press
Here is the biggest change in selling a home since the printing press was invented. Looking for selling a home process? This is the must-do process to sell a home.
How To Sell Your House Without A Real Estate Agent
This for sale by owner video is about empowering you to make informed decisions on what you’ll need to do to save the commission by selling a house without a realtor.
Selling A Home In 2022? The Most Important Question You Must Ask
There is one singular issue that stands above all others when selling a home in a strong sellers' market. In this video, I walk you through the question and best answer to the most important question you should ask when selling a home.
Get More Money For Your Home
In order to understand how to get more money from a house sale, one must learn about the neighborhood stalker.
Real Estate Negotiation Strategies For Each Market Condition
If you mishandle the negotiation on a home, several things will possibly happen, and all of them are bad. First and foremost, you’ll leave money on the table through either the sales price or the terms that are negotiated. Today, buyers are losing out on homes they want to buy and it’s often due to poor positioning in the negotiation. And while we are in the midst of a historic sellers’ market, I’m seeing sellers leave money on the table even when they have multiple offers! #realestatenegotiation #homenegot
Home Selling Tip: Don't Price Your Home On The 9s!
One of the most important steps in your marketing strategy when selling a home is setting the initial asking price for the home. While I have discussed this in previous videos, today I’m going to discuss a technique that I refer to as pricing on the 9s. It works to reduce the buyer pool for the home seller and reduce’s the seller’s chances of getting top dollar for the home. It is a terrible tactic and works against the seller. If you watch this short video, you’ll understand exactly why it hurts home selle
How Much Margin For Negotiation Should I Include In My Asking Price?
I was recently asked "How much margin for negotiation should I include in my asking price?" This is a common question from experienced home sellers. They have sold homes in the past and understand the negotiation process involves a game of give and take, so doesn’t it make good sense to start with a little wiggle room in your price so that you can give it to the buyer to secure a sale? Here's what you should know. I explain EXACTLY how much margin for negotiation you should add to the price of your home t
10 Home Inspection Issues And Tips
Moving from one home to another has enough stress and chaos built into the entire affair, and the home inspection is often the biggest stressor. Here's how to avoid home inspection stress!
Home Staging Advice For Sellers
Do you wonder how to net more money selling your home? This is one of my top home selling tips. Today's video is everything you need to know about staging your home in order to NET the most money from your sale. ?? Here's a link to our FREE Home Sellers Checklist mentioned in the video:
What Does A Transaction Coordinator Do?
When you are selling a home or buying a home, a critical member of your support team is your transaction coordinator. Here's what to expect!
Real Estate Appraisal Versus Fair Market Value Of A Home?
What is the difference between a real estate appraisal and the fair market value of a home? If there is one practice that confounds both home buyers and home sellers alike it's the fact that the majority of real estate transactions close at the mercy of an appraisal conducted for a purpose that most consumers do not consider. Understanding these differences will save you money when it comes to buying or selling a home, and it will help you appreciate the need and value of a real estate appraisal. But here’s
First Right Of Refusal Meaning Explained
What is a right of first refusal? What does first right of refusal mean when dealing with a real estate contract? Accepting real estate contingencies without understanding them often causes home sellers problems. I have shared a real-world example of how we handled a first right of refusal real estate contract negotiation, and the decision-making process used to put the home seller in the best situation possible. Pay close attention to this short video and you’ll have a better understanding of the right to
Why It's Alway About Supply And Demand In Real Estate
It's all about supply and demand. The real estate supply and demand dynamic tells us everything we need to know to forecast home sales in any given area.
The Truth About A Dubious Real Estate Statistic
They're Lying! When it comes to buying or selling a home, it's important to recognize false or misleading real estate stats (real estate statistics) that can lead to costly mistakes.
How To Sell A Home That Needs Repairs
How To Sell A Home That Needs Repairs - If you want to know how to sell a fixer upper house fast, then there are some fundamentals of selling a fixer-upper that you should understand. Ideally, in real estate sales, when selling a home, you should bring a house to market-condition before you sell your house fast in order to attain top dollar during the sale. But ideal situations are not always possible. If you follow the tips and advice in this video, you will know how to sell a fixer-upper house fast and in
What Is Pre Marketing In Real Estate When Selling A Home?
What is pre-marketing in real estate when selling a home? When your home hits the market and it "goes live," how many buyers will be standing in line to get in? Will it look like an Apple store on the day the new iPhone is released? If not, why not? ... it's all in the video ??????
What Is A Seller's Market In Real Estate?
You might have heard that we have a huge seller’s market right now in real estate. Do you know what that means? This real estate frequently asked question comes up from time to time when somebody is buying a home or selling a home. They want to know if its a buyer’s market or a seller’s market. Is now a good time to buy a home in the Tallahassee real estate market? I have prepared this short video to demonstrate the conditions that make this a seller’s market, and then we’ll show you the numbers and how we
How Digital Has Changed How We Sell A Home Today
Time to sell a home? The digital age has had a huge impact on what homeowners must do to get top dollar when selling their home. In this video, Joe Manausa explains why and how things have changed, and then lays out the plan for what home sellers must do.
5 Ways To Handle The House In A Divorce
If there is one thing that I see divorcing couples doing wrong more often than not, it is the decision on how to handle the house where the couple has lived. While I am not a lawyer and I'm not dispensing legal advice, take it from somebody who has helped hundreds of divorcing couples, there is a right way (and FOUR wrong ways) to handle the house in a divorce. Tell your attorney that you want to do it right!
Four Smart Ways To Use A Real Estate Contract Assignment
Contract assignability allows buyers to give or sell their rights to another buyer, and that creates opportunity. Tune in to discover four reasons to assign a real estate contract (including contract assignment profits)
Ugly Real Estate Listing Pictures | Real Estate Photography Tips
I’ve got some funny, ugly real estate listing pictures to share with you today, along with some simple real estate photography tips. Take a humorous look at some of the WORST pictures I have seen used when marketing a home ... not the way to sell your house!
How Long Does It Take To Sell A Home In 2021?
How long does it take a home to sell in 2021? I've been asked this question a lot recently, and it made me realize a full explanation was in order. Why? Because if you understood how to sell a home for top dollar, you would know that it is a trick question. Trust me on this. Invest the few minutes it takes to watch the video and you'll have a better understanding of selling a home than do most people in the real estate industry (and I'll prove it!).
What Is A Swimming Pool Worth?
What Is A Swimming Pool Worth? Recently, a customer buying a home asked me a simple question. She inquired “how much does a pool add to the value of a home?” Pretty simple question, right? Well, by the end of this short video, you’ll know the not-so-simple answer (and why this is so important).
Real Estate Is Local - What This Means!
If you plan on buying a home, or selling a home, you’ll want to understand the local nature of real estate and use it to your advantage.
How HGTV Is Like Meth For Homebuyers
This is what I have observed regarding the HGTV impact on buying a home and selling a home.

There are a lot of people who endorse Joe for the job of selling your home, including Preston Scott (host of Tallahassee's top daily "Audio Magazine," as well as the thousands of happy customers Joe has helped in the past. Listen why!

Post a Comment

(850) 378-5727