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Birmingham, AL real estate appraiser Tom Horn explains why price per square foot should not be the main criteria when estimating the value of a home.
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Suggested by Tom Horn-Real Estate Appraiser |
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Lynn Pineda's curator insight,
October 27, 2016 8:47 AM
This article is a must read to discover how a home's value is determined. I can't tell you the number of times that I've had Real Estate Agents profess their accuracy in pricing by simply pointing to its square footage! As Tom Horn, explains in his excellent article, pricing a home is about so much more!
To me, it's common sense that price per square foot alone will never reveal a home's true value. What lies behind those walls and where those walls are located whether lake side, golf course or along a busy wall will certainly change a home's value. So to me, it's screams in your face!
I can't tell you the number of times that I hear someone try to talk a home's value by saying, "...well the square foot of this home is such and such and the home that just sold was such and such, so the price should be ......" Crazy!
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Want a lazy and inaccurate way of figuring real estate value? I know you are probably thinking I am going to talk about a Zillow Zestimate aren't you? Not a bad guess!
Zestimates of value as Zillow likes to call them are completely inaccurate most of the time but this discussion is not about that.
I am going to talk about price per square foot which is a close second in terms of being able to predict a homes value.
Using price per square foot does not use any sensibility or logic as Tom Horn points out in his latest article.
This is in fact a topic I have written about myself. See why price per square foot doesn't get value correct for a complete explanation.
Basically there are four classifications of housing as follows:
It shouldn't be hard to figure out that an economy home is not built the same way as a luxury home or anywhere in between. You can have the same identical homes side by side in the same neighborhood and one home may have all sorts of amenities like:
It is not hard to understand that if one home has all of these things it is going to sell for more money than one that doesn't!
You will notice, however, that I mentioned these homes are identical in size.
You can't transfer the price per square foot from one to the next without butchering the value.
Now let's introduce location into the equation. Homes on main roads sell for less than homes on country roads with less traffic. Homes on country roads almost always sell for less than those found inside a subdivision or neighborhood.
So again you cannot transfer price per square foot from one home to the next!
Take a look at Tom's article and if you find it helpful, give is a share.