Today we're going to talk about why the price per square foot really is quite useless when you're looking at a sale price or a purchase price for a home.
Here's why I am of the opinion that the price per square foot really bears no relation to the value of a property. I will say though as a caveat to this, that if it's brand new construction of say a spec house or if it's a strata title property or really, really cookie-cutter houses - then it bears more of a relation. However, if you're looking at a property that's a resale property, it's very, very difficult to base your judgment on what it's worth on the price per square foot, and here's why upgrades and features are so different for every single house for sale.
A house that was built in the 80s that's entirely original is worth an entirely different number than something that's been totally renovated. However even looking at some of the smaller items like countertops: laminate versus granite. Granite is worth substantially more. Even subdivision properties have outbuildings that aren't taken into account in a price per square foot. Even a shed, could be a detached shop, could be a fence, what about someone that has two acres of land versus someone that's on a quarter acre? None of that is taken into account and then outdoor living space is not included in the price per square foot.
It's really a lazy way to come up with value - yes I've said it - it's a lazy way to come up with value. What about a nicely landscaped lot that is extremely expensive to do versus a home that has nothing on the outside? Even things like stone exterior versus vinyl siding - the only way really to determine the value of a property for a Realtor is to look at comparable sales look at sales in the same neighbourhood. It has to be sales, not what's for sale because active listings are "fantasy land", what they sell for is the reality.
So look for those sales in the same neighborhood around the same size, around the same age, around the same type of home For example, you have to compare level entry homes with level entry homes, you can't compare level entry homes with grade-level entries. Well, you can, but you'd need to do some adjustments for that. Comparing a two-car garage with a three-car garage, again you can look at the comparables, however, then you have to adjust it back. Your home has a two-car garage the house down the street has a three-car garage, okay what's that third garage worth? And you can determine that by looking at what other homes have sold for that have three-car garages that are comparable.
It's really more of an art than a science, and that's why it's so important to hire a Realtor that has the expertise and the experience, and the knowledge to know what's happening around the neighborhood and what properties are selling for and why. If a Realtor just ballparks a price per square foot they are not doing you a service I'm afraid... Really that's not much more than throwing out a number and keeping your fingers crossed. It's important when putting a value on your house that it's accurate and not based entirely on price per square foot. Conducting a proper professional home evaluation takes time and effort and you want to hire somebody who's going to be putting in that time upfront to give you the best advice possible.