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Determining a home’s value

How accurate is price per square foot when determining a home’s value?

Determining a home's value

Although this method can be useful in learning the general value of tract style homes, such as Glendale’s Oakmont Woods, La Canada’s Briar Tree neighborhood or La Crescenta’s Markridge Estates, its very basic and does not consider, lot size, views, etc. Price per square foot is one of the simplest concepts in real estate. Price divided by square footage equals price-per-square foot. Most of our Glendale, Pasadena, La Canada and La Crescenta homes are custom built; quality and style vary greatly. For example:

The home on Main Street:

3,000 square feet
8,000 square foot lot
Built in 1980 with little architectural integrity.
Outdated kitchen and baths
Sited on a busy street.

The home on Boardwalk:

3,000 square feet
15,000 square foot lot
Built in 1960 | mid-century modern design.
Designer Kitchen
Hilltop setting with views.

Obviously, the home on Boardwalk is worth substantially more than the one on Main Street. The price-per-square foot formula does not consider lot size, location, amenities, style, etc. This example proves that you cannot simply take the price-per-square-foot and multiply it by the square footage of a home when selling. There are too many variables. When using this method as an indicator of value it is important to compare only similar properties. Similar in size, room count, lot size, location, architectural integrity, and amenities. There are other variables, such as floorplan; a poor floorplan is also not considered in the price per square foot equation.

Quite simply the value of a home is determined by what a buyer is willing to pay. Any other valuation is really an estimated range. Most experienced Realtors will recommend a list price and predict a value range of where they believe the home will sell.

Related Post: Appraisal Discrepancies

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