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Valuing Real Estate by Price per Square Foot

Friday, January 13, 2006 posted by Tommi Crow

Buying or Selling, Price Per Square Foot is an excellent method, used by appraisers, to determine market value. The closer the subject house compares to yours in age, condition, square footage and lot size, the more accurate your calculations will be. Use the information your legwork uncovered to arrive at the price per square foot for at least 3 homes competing against yours in the market place.

To determine price per square foot, take the homes asking price and divide it by the finished square footage of the home, (finished usually means heated or air conditioned floor space and does not include garages, attics, etc.).

Sales Price ÷ Square Feet = Price Per Square Foot

Step 2: Average the price per square foot in your neighborhood. By averaging, you even out the highs and lows. Total the price per square foot for each of the comparable homes. Divide the total, by the number of houses you included. You now know the Average Price Per Square Foot of Homes For Sale in Your Neighborhood.

Step 3: Take the Average Price per Foot and multiple it by the square footage of your home. You now know the sales price based on the average price per foot price for comparable homes.

Your Square Feet x Average Price Per Foot = Average Sales Price

The opposite view can also be helpful in comparing your price relative to your competition. How does your asking price compare with the average asking price per foot of your competitors?

Your Target Asking Price ÷ Your Square Feet = Your Asking Price/Foot

The more closely your house matches the features of the subject properties, the more certain you can be. Most important is to be objective and realistic when pricing your home against your competition. You know the hard work, upgrades, window treatments, custom paint, wallpapers, etc. that you have paid for during your time of ownership. The question is, will a buyer recognize these upgrades and be willing to pay more for them?

For more information read our previous blog on the dangers of overpricing. As always, if you have a question, comment or feedback about real estate or marketing, email tommi@infotube.net.