I recently read an article where an appraiser talked about how he figured “price per square foot.” He said it has become a common practice to take the selling price and divide it by the gross living area which has, in some areas, become the basis for establishing the listing price of a home.
However, it’s not as simple as that.
Appraisers also rely on an index provider called “Marshall & Swift” (MarshallSwift.com), which provides various cost estimates for different types of properties. When appraisers figure a price-per-square-foot estimate, they take the following into consideration.
- Superior/inferior features as compared to other properties
- Dissimilar amenities
- One-story home versus two or more stories
- Length of time on the market
- Seller concessions
- Size of the land
- Location of the home (i.e., view, utility easements, corner lot)
- Seller motivation to sell (i.e., foreclosure, short sale)
There are many stories out there of buyers backing out of contracts because the square foot price of the home on the listing agreement (or verbal communication) did not match the appraiser’s estimate. So, when a buyer asks you the question, “What’s the square foot price?” you can say…“It depends upon….”