In fact, that class was my first indication of how arbitrary the measurements could be.
We had over 30 future real estate professionals in my class. I’d like to think we all had good heads on our shoulders. We were split into groups, handed tape measures and asked to come back with the actual measurements of our classroom. What do you think happened?
6 groups.
6 measurements.
Go figure! (very punny!)
So what’s a Realtor to do? In some states, the mere mention of square footage will get you sent to exile island! I once asked a client moving from one of these states for the square footage of the house they were leaving. She had no idea. Remarkable!
But most often, square footage is NOT used just to figure size of rooms for comparison. Things get sticky when square footage is used as a price calculation tool.Example: A buyer’s agent, not familiar with a certain condo development, evaluating the price of the condo a client is interested in purchasing runs sold comps on similar condos in the building. Pulls pictures of those comps, sorts out the incomparable and determines an ‘average’ price per square foot (ppsf). Let’s say, for the sake of argument: $200.
Agent looks at MLS stats and determines that there are no significant differences between the subject property features and these comps. Same # beds and baths, same appliances, same services in the building…. takes subject property square footage (1600), multiplies by average ppsf ($200) and comes up with a suggested offer price: $320,000
But, for some reason, the listing price is $350,000. How could that be? Surely that listing agent did their research when pricing. Why would things be so far out of line with averages? Sure, the place was nice…but $30,000 nicer than average? Not likely. So it’s time to do some further research, right?
So let’s take closer look scenario and how the listing agent might have come up with that price. The agent pulled those same comps and did some homework (called the listing agents or appraisers with some questions, looked at the comp properties). After further investigation:
- Two comps listed as sold for $205/sf actually had mezzanines built in the loft areas of the units that should not really be computed in comps the same as main floor living space. Access to bathrooms was limited, even though mezzanines were used as master bedrooms. Subject is all on one level with extra large master bath.
- Another had basement space with no egress that was listed as full price square footage, as well.
- Several in the $200/sf range were on lower floors with no city views and limited numbers of windows.
- Three had less attractive parking options.
- Three on upper levels had parking lot, not city views.
- Seven had limited closet space. Subject had extra closets and storage throughout.
- No others had upgrades beyond original developer finishes. Subject had $20,000 in lighting, window covering and paint upgrades picked by professional designer.
You get the idea. There are so many factors that contribute to the value of a home that have nothing to do with its size. The average ‘adjusted’ price per square foot might have been $225/sf.
How does that calculation look now?
$1600 sf x $225/sf = $360,000. That $350,000 condo is a bargain!
So be careful not to fall into the ppsf trap…
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