Estimating property value per square foot seems to be a very common practice among consumers looking to sell homes in Orange County. Perhaps because it does make a certain amount of sense to those not in our industry, however there are too many flaws for this to be a reliable formula.
For example, a prospective client values their home at $325/sf because their neighbor across the street sold at $650,000 and the home was 2,000/sf. Since the client's home is 3,000/sf they just add $325,000 to the price of their home and walla....they know how much their home is worth?! WRONG
Let's review two basic standards licensed appraisers are required to follow, without getting too technical:
- Land and building costs are separated in an appraisal. In the example above the land, building, and all improvements are lumped together. In an appraisal separate adjustments will be given for land, buildings, and other improvements. These adjustments will differ depending on the area, market conditions, location, etc.
- Appraisers compare "similar" homes. Appraisers will not compare a 2,000/sf home to a 3,000/sf home unless there are unusual circumstances.
The standards above are general and in addition to the hundreds of USPAP (Uniform Standards for Professional Appraisal Practice) guidelines appraisers follow. It can take an appraiser 6-8 hours to complete a report depending on distance, difficulty, availability of sales, etc, and the costs can run from $350-$800+. Simply using a per square foot measure may be convenient, but is NOT the correct method to valuate property properly.
Hire a professional:
1. Banks hire real estate appraisers and real estate professionals in Orange County to conduct valuations for a reason, the formula is not that simple. Hire a professional appraiser or real estate agent for an accurate valuation.
2. Per Square foot, averaging, and algorithmic methods (like those used by Zillow) do not and cannot EVER account for certain factors like market conditions and "non-arms length" listings and sales. These methods only work under "perfect" circumstances. Homes in Orange County can vary greatly in value because of views, proximity to the beach, and many other factors.
Valuation is probably one of the most difficult skills to master in real estate, so make sure you hire an Orange County Realtor who understands the principles, and do not rely on your own methods of valuation.
For a confidential consultation on how much your house is worth in Orange County, CA please contact one of our professionals or go to What's My Orange County House Worth?