The Price Price Per Square Foot Debate!

Buyers who get overly concerned with price per square foot can become very confused.

Using only price per square foot for comparing properties gives buyers an unrealistic look at the real estate market in general.

• It's much better to use recent sold comparable homes, compared to the one you are thinking of buying,  that are in similar condition, the same area and have the same number of bedrooms!

Becoming obsessed with price per square foot can lead to making a purchase that you may regret later because there is no common price per square foot formula, due to the many different variables, such as age, condition, (repairs needed), neighborhood, number of bedrooms, and amenities such as swimming pool and of course lot size.  

The concept of price per square foot originated with newly built homes. But even the price per square foot of a brand new home can be different as well, due to the quality of materials that the builder uses.

 

• But most of the time it gives buyers an unrealistic look at the real estate market in general.  Because buyers see a home that sold for really low price per square foot without investigating the property to find out more about it.

Here's some examples of how vastly different price per square foot can be and why:

The 6 homes in the chart below were all sold in Temecula in the same time-frame.

All of them sold for $250,000 and the lowest price per square foot home had major problems while the one that sold for higher price per square foot had little repairs and was in a lower tax area than the other home.

Highest Price per square foot home in my example had a price per square foot cost of $135.43/ppsf.  The location was right next to the Temecula Wine Country, it had new carpet, new paint, and was newly landscaped and it was in  a Temecula low property tax neighborhood.

The highest price per square foot home had the least amount of repairs, and was in a low tax area right up against the Temecula Wine County!

The Lowest Price per square foot home is shown below,  and in the description it says it has not only mold issues but septic tank issues also.   These repairs can cost many thousands to repair and I'm not saying that it was not a good deal at this price, but the price per square foot was low due to the condition of the home.

Buyers often express their criteria for a property and a typical criteria is as follows:

• Low Tax Area - No or low assessments 
• Low HOA fees
• Rental ratios better than 1% of the purchase price, for investor clients
• Repairs factored into offer price
• Yard size of a minimum of 6000 square feet
• Investors usually want 70-80% of market price 

All of this is possible to find, but when buyers complicate this above search criteria with price per square foot without looking at other comparable factors, they become confused.

Here's why other factors need to be considered.

• If a home has low price per square foot but has mold issues, no appliances, holes in the wall and a leaky roof it can cost tens of thousands to repair.
• Number of bedrooms are actually more important for rental properties.  If a home that has low price per square foot and only two bedrooms then it will rent much lower than a home that has the same square footage with 4 bedrooms.
• A turn key home that has already been rehabbed will have higher price per square footage but will require less money to make the home "Turn-Key".
• The Age of the home as well as the neighborhood that the home is in can be extremely  important also, especially in some cities like Moreno Valley, California.  Some areas in Moreno Valley were built in the 1950's and the price per square foot is lower there also.

Don't confuse price per square foot with the other aspects of a home, use recent sold comparable homes that are in the same condition, the same area and have the same number of bedrooms!

Call me for more information about buying a home in Southwest Riverside County, California, or North San Diego County.

Call or e-mail me for even more specific data that meets your search criteria.  Want same data for a different City or area?...just let me know!

Jane Grant Broker of Record for Southwest Real Estate, Toll Free:    866-621-0155

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Contact me for information regarding Homes in Riverside County, Real Estate in Southwest Riverside County. My office is in Temecula, and I specialize in selling homes in the Murrieta and Temecula,  Wine County, De Luz, La Cresta, Bear Creek, Murrieta, Wildomar and Menifee, Canyon Lake, Canyon Hills, Lake Elsinore areas! Anywhere in Southwest Riverside County and North San Diego County. 

 

Broker of Record- DRE 01109492
Southwest Real Estate, Inc. 

 

 

 

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