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I recently bought a home in Woodbridge, NJ for $315K while the one directly next door sold for $280K in Apr 2013.
The major difference between the two homes is that my house is exactly 300sq ft larger (previous owner made an addition). Its a split level with a single car garage. House next door has no living space above the garage while my house was extended; hence, the add'l sq ft (resulting in larger bedrooms)
GLA is 1980 vs 1680 so in terms of price/sq ft, I paid $159 vs $167. Everything else about the two home is the same except: he has a finished basement and an above ground pool.
When looking at very similar homes, can you simply use price/sq ft as a good proxy to determine whether or not you paid in line with the current market?
Ironically in my case, when I do the math, the house I bought was listed for $330K which comes out to exactly $167/sq ft (same as the one next door). At least now I know what they used to price their place and the fact that I was able to negotiate the price down makes me feel like the ultimate closer...
It's just a guideline. Nothing more. Two homes from 1910 can be the exact same square footage, but one could have never been updated and poorly maintained and the other could have been recently updated and renovated with all the modern conveniences and energy saving features and look immaculate. Guess which one will command a higher price and thus higher $/sf? Also, it depends on how much a buyer values such things as updated features, a pool, yard, etc. etc. Appraisers use standard amounts they use to add/deduct from their appraised value, but only an individual buyer can tell you how much they value (or don't value) a particular feature of a house, and they are all different.
What matters is not how much you paid for your house compared to someone else, it's whether or not YOU think you got a good value.
What if you are fairly confident that your house was maintained much better than the one next door and you still paid less per sq ft?
Granted I haven't seen the one next door from inside, but the one I bought was meticulously maintained. Of all the homes I viewed (around 25), this one blew all of them out of the water in terms of maintenance. It was actually the main reason why I purchased the house since I knew the previous owners really took care of it...
PS: The only reason why I ask is because the house is next door in a development with very similar homes (about 50 homes).
Lets pretend we were talking about cars. Both used cars are 2002. Both have 40,000 miles. Are they worth the same?
Upon further inspection, you can see one car is dented, scratched, smells like smoke and beer and has stains all over the seats, the oil was never changed and was owned by a 16 year old who used it to drag race. The other car was owned by little old lady who drove it to church, did all scheduled maintenance and is immaculate. Are they worth the same? Same car right??
No two cars are the same, neither are houses. Now can you see why comparing price per sqft is useless?
I understand your points. Humor me with the following:
Hypothetically speaking, what if they were brand new homes with the size being the only difference.
Can the price/sq ft still be used to compare the two, making the more expensive home relatively cheaper due to its bigger size.
I know every $1 of improvement doesn't equal to $1 increase in a house's value, but what about size? Can every sq ft be treated equally and a home that is 10% bigger should automatically command a 10% higher price?
If the lot sizes are the same, you would expect the smaller house to have a higher cost per square foot--everything else being equal--because the cost of the land is spread over a smaller denominator.
I understand your points. Humor me with the following:
Hypothetically speaking, what if they were brand new homes with the size being the only difference.
Can the price/sq ft still be used to compare the two, making the more expensive home relatively cheaper due to its bigger size.
I know every $1 of improvement doesn't equal to $1 increase in a house's value, but what about size? Can every sq ft be treated equally and a home that is 10% bigger should automatically command a 10% higher price?
Price per sf is absolutely the most meaningless and useless measure in all of real estate. I don't know why so many consumers are so obsessed with it. As one person once said to me, price per sf is a great way to buy carpet but not a whole house.
The problem is there are too many variables at play to make it a useful measure. It's too "averaged out" to be valid. Even in a situation where both homes are exactly the same and the lots are exactly the same size there are still plenty of factors to consider. Is one location more valuable? Are the lots the same shape? Is the land equally level at both sites? What are the views like? I've even seen in condo buildings two buildings which were essentially identical sell for wildly different $/sf because the they were on different floors.
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