How to determine price per square foot?

[Silverfall]

Originally Posted by BrokerHarry

If price per square foot is so meaningless & irrelevant...then maybe you can explain why appraisers go thru the effort of ascertaining the accurate dimensions of the dwelling before they determine the market value of the property?

I have never met an appraiser yet who didn't consider price per square foot somewhere in their report.

Um, that is because they use the required Fannie Mae Uniform Residential Appraisal Report (Form 1004) which has it as a line item. The form was created by Fannie Mae, not appraisers. It is a lender-driven form. So that is why they put it on there. Putting it on there because Fannie Mae requires it, and considering it in their calculations are two different things.

They measure the house because people do additions all the time without permits. They measure the house because the floor plan the builder submits to the city/county isn't what actually gets built sometimes. They measure the house because one of the adjustments they do is for square footage and they need to confirm the square footage to confirm the needed adjustment.

It is meaningless and irrelevant for anything other than ballpark/computer algorithms. We can disagree on the value of that calculation, but if you are going to be so pro using it, at least know why appraisers note it.

[thebigW]

Originally Posted by BrokerHarry

If price per square foot is so meaningless & irrelevant...then maybe you can explain why appraisers go thru the effort of ascertaining the accurate dimensions of the dwelling before they determine the market value of the property?

I have never met an appraiser yet who didn't consider price per square foot somewhere in their report.

Appraisals include an adjustment for square footage. However, it is typically the last adjustment that is made, and it is not derived by dividing the purchase price by the size of the dwelling.

[vb808]

Originally Posted by BrokerHarry

To the contrary, I believe price per square foot is extremely meaningful, & anyone who doesn't consider or know their $psf is flying blind.

...by calculating the $psf, it allows the interested party the ability to now ascertain the additional cost, plus or minus, of those upgrades or amenities, or lack thereof.

Respectfully, I will never agree with any agent who says price per sq ft is meaningless.

I totally agree with this statement. I think price per sq ft should be used to establish a base price then add or subtract a $ amount based on upgrades, location, layout etc from another comp. One thing that really annoys me is how some realtors will pad sq footage; a good example - I am looking at a townhouse to purchase. Listing agent lists sq ft as 2000. However it turns out they included the attached garage in that calculation.

Most people do look at sq ft, realtors know this and some will purposely pad the sq footage just to get buyers in the door. Luckily the townhouse is a PUD and the city assessors site lists the sq footage of the building as well as the size of the owned plot of land underneath. Turns out the living area is actually 1700 sq ft.

Padding sq ft is bad for comps. Another townhouse down the street which does NOT have an attached garage is listed at 2000 sq ft. The true living space is approx 2000 sq ft - so more living space than the townhouse I mentioned above. When my realtor ran a CMA, the comp down the street was included, yet he never mentioned to me that garage was not included in sq ft calculation. Luckily I'm familiar with how this all works and was able to determine a fair price for the townhouse I'm looking at. The average buyer would probably not be aware of this.

I also found that some realtors are simply lazy and will copy inaccurate info from a previously sold comp of an identical unit to use for a new listing. Go in and take measurements of the room sizes before you list the property! I say BS to the statement "price per sq ft is meaningless".

[vb808]

Originally Posted by RestArea

A lot of listing agents are absolutely shameless in my opinion.

Yes, totally agree!