Let’s take a look at an example of how price per square foot can vary.
Alex and Taylor are next-door neighbors, and they’re both selling their homes. Alex is selling their 1,500-square-foot home for $280,000, while Taylor is selling their 2,000-square-foot home for $300,000.
Alex’s price per square foot is $187. Taylor’s price per square foot is $150. Even though Taylor’s home is more expensive overall, isn’t their home the better deal because you’re getting more space for less money? And does this mean that Alex’s home is overpriced?
Consider this: Alex, knowing they’d be selling soon, made some updates to their home to boost its value. Taylor, on the other hand, didn’t make any improvements to their home, so the interior shows a little wear and tear and several of the home’s main systems, such as the HVAC, will likely need to be replaced in a few years. In this case, Alex’s home might be the more attractive option for home buyers.
Additionally, even though larger homes typically cost more overall than smaller ones in the same area, larger homes often have a lower price per square foot than smaller homes. This could account for some of the difference between Taylor’s and Alex’s prices per square foot. Or, maybe Alex’s home, in spite of being smaller, has more bedrooms than Taylor’s home, making it more attractive to buyers.
It’s difficult to tell from price per square foot alone whether a home is fairly priced. However, that doesn’t mean that knowing a home’s price per square foot is completely useless; it’s just one of many different data points you’ll use to help you evaluate whether a home makes sense for your budget and needs.
FAQs
Price per square foot is typically calculated by dividing the purchase or list price of a home by the overall total square footage of the home. For example, if a 1,000 square feet home is priced at $200,000, the price per square foot is $200. Price per square foot is a metric frequently used in real estate.
Is price per square foot a good indicator? ›
Many appraisers consider price per square foot as a good value indicator, but not the major determining factor in their final opinion of value. There are many aspects and characteristics that come to play when placing an opinion of value on a property.
How much per square foot is a good price? ›
The average cost can range from $54 to $270 per square foot based on a home size of 2,600 square feet. These cost estimates are for a standard suburban tract house. Neither economy or luxury in quality, it's your typical suburban tract home. An economy home might cost as little as $33 per square foot.
Why do appraisers not use price per square foot? ›
Value: Appraisers do not give value to square footage based on construction costs, but rather the reaction in the marketplace to extra size. Think of it in terms of a kitchen remodel or pool. Just because a kitchen costs $75,000 to remodel does not automatically mean you'll see $75,000 in value in the resale market.
How to calculate sq ft? ›
Measure the length and width, in feet, of each room. Then, multiply the length by the width to calculate that room's square footage. For example: If a bedroom is 12 feet by 20 feet, it is 240 square feet (12 x 20 = 240). For each room, write the total square footage in the corresponding space on your sketch.
How to calculate price per square foot office space? ›
It can be calculated by dividing the price of the building by the building's square feet. For example, if a 2500 square foot building is selling for $250,000, then the PPSF is $100. Price per square foot can vary depending on where you would like to purchase or lease commercial real estate.
Should I look at price per square foot? ›
The average price per square foot calculation is useful mainly to spot wildly overpriced or underpriced homes. Though this can be beneficial, it's not always the best method for assessing a home's value. For example, this calculation doesn't consider the condition of the home or the amenities it provides.
Why doesn't price per square foot matter? ›
Prices per square foot can vary widely based on location, lot size, overall condition, the age of the property, upgrades, and a host of other factors that make each property unique.
How do appraisers determine price per square foot? ›
Price Per Square Foot Guidelines
Hopefully, this will help agents be in the same ballpark of value with the appraiser when they price their listings. When calculating the price per square foot the correct method is to take the sale price and divide it by the gross living area (GLA) of the home.
Is 3500 sq ft too big? ›
Houses of 3000 to 3500 square feet are large enough to create a luxury home that can suit almost any family. Features such as high ceilings, an expansive master suite, home office, media room, or separate guest space can easily fit in an upper-mid-size home plan.
Square Footage
Visualizing the square feet of a room or house that matches your family size can help you choose the right home size. On average, the ideal square footage is about 600 – 700 square feet per person. That means a family of three will want a house that's at least 1,800 square feet.
Why do smaller homes sell for more per square foot? ›
The reason is you still have plumbing, electrical, kitchen , bath , and heating and cooling all in a greatly confined space in a tiny house . Those are some of the most costly items in any living dwelling. So a smaller space with all the same features as a larger space would logically cost more per square foot.
How do I figure out the price per square foot? ›
The steps to calculate the price per square foot (PPSF) are as follows.
- Determine the Purchase Price of the Property (Fair Market Value)
- Measure Total Square Footage (Length × Width)
- Calculate Price Per Square Foot (Property Price ÷ Total Square Footage)
“You can't always avoid [a low appraisal],” says Megan Walters, a top-rated agent who sells homes more than 41% faster than the average agent in her Columbia, Missouri, market. Most appraisals come in at the right price. According to CoreLogic, in general, appraisals come in below contract only about 7-9% of the time.
Do appraisers confirm square footage? ›
If a homeowner skips the permitting process, the local taxing municipality won't know that there's additional square footage. That means it won't be reflected in the property records. This is why appraisers will also do their own measurements of the property, and they may note a square footage discrepancy.
How do you calculate sales per square foot? ›
To calculate this metric, divide total in-store sales by the available selling area in the store. In the last month, for example, Jenny's Apparel Hub, a family clothing store, sold $1 million worth of merchandise in its 2000-sq-ft shop. In this case, the store's sales per square foot will be: $1,000,000 / 2000 sq.
What is the square foot method of cost? ›
The square foot method combines all the costs for a particular type and quality of structure into one value as a cost per square foot (or cubic foot). This method produces a value based on the floor area of the structure.
How to calculate labor cost per square foot? ›
Multiply the direct labor hourly rate by the time required to complete assembly to get your total labor costs. Calculate material costs separately and add this to the total labor cost to get your total direct costs. Next, divide the total labor cost by the square footage to get the labor cost per square foot.
How do you convert a price per square yard to a price per square foot? ›
Compare footage to yardage
There are nine square feet in a square yard. So if you have a measurement in square feet, you can easily convert to square yards by dividing by nine. If you are looking at a square-yard price and want to know the price per square foot, also divide by nine. See, you can do this!
