Home Buying Don't Get Hung Up On Dollars Per Square Foot
Many times as a Realtor when I work with clients buying a home they will often compare dollars per square foot as a
measure of a homes value from one neighborhood to another and use that to guide them when making an offer. While it makes sense to them and on the surface it makes sense to a lot of people, you really need to look at what is behind the numbers, when you can rely on the numbers and when you should not.
Comparing homes using dollars per square foot works well when comparing similar sized homes and lots in the same or similar community with similar amenities and levels of finish...it's even a good idea to include the same builder...you need to compare apples to apples. If for example homes in the modest Potters Mill neighborhood of Madison Alabama sell for an average $96/square foot, that would make the average sale price around $155,900 for homes there with average trim packages and standard builders quality construction. However, and this is an extreme example to make a point, if you compare the Potters Mill neighborhood to the more upscale Clifts Cove community in Madison Alabama where the average dollar per square foot is more in the range of $122/square foot and an average sale price of $577,380 the difference is obvious. Different communities and builders command different $/square foot, granite and hardwoods cost more that laminate, crown molding and architectural shingles more than drywall corners & 3-tab shingles, etc. The difference can be even more dramatic when comparing different upscale communities. Do you think you can compare upscale Clifts Cove with the upscale Ledges in Huntsville Alabama community where the average price per square foot is $211 and an average sale price of $1,028,000? Use the $/square foot averages within the community that produced those averages.
In my opinion your best guide about the value of a home or what to pay is to have your Realtor research the neighborhood and surrounding similar neighborhoods for recent comparable sales, preferably within the last 3 months. Unless the home you are considering making an offer on is a foreclosure property then do not consider another foreclosure as a comparable. To come up with a reasonable estimate of value, your Realtor also needs to research the age of homes, level of finish, updates and pay attention to seller concessions as they also can reflect on a final sales price. Bottom line...you cannot apply dollars per square foot across the board to determine a homes value or what you should offer. You can use dollars per square foot in specific communities with comparable homes having similar amenities and levels of finish.
Content originally published at....http://nicktpappas.com/?p=2239
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