Market Insights: Is price per square foot a valuable gauge?
Ryan Summerlin March 16, 2013
No.OK, it is an itsy-bitsy, teenie-weenie bit helpful. (If, when you read that statement and your mind kept going and sang, “An itsy- bitsy, teenie-weenie, yellow polka dot bikini” you’re old, like Daniel old, as that song was a top 10 hit single in 1960.)This point is a game-changer for lots of buyers. Do not focus on the price per square foot of a property. It is nothing more than a very broad gauge of value. That’s it. Not much sends me around the bend more than buyers who, thinking they are getting a deal, say, “Based on my homework, I will not pay more than $312.50/square-foot.” This sort of thinking is not actually the buyer’s fault. We, the Realtors, are to blame also.Years ago, the real estate industry started to publish the price per square foot of every place. As a matter of fact, when you look at a “detail view” provided by the Summit Association of Realtors, right at the top in the center, next to the price, we see “List Price PerSqFt.” Being front and center grabs your attention. Before the buyer knows it, they start comparing properties based on this one gauge only. Here are the five reasons to eliminate the “price-per-square-foot mentality.”
Based on the price per square foot, a client brought to my attention a single-family home. This house really looked like a bargain. The price per square foot screamed “cheap, cheap.” The only problem was the property had two bedrooms and my client wanted three. Not a problem said the advertising, which read, “Easy to convert that into third bedroom.” The issue was underground. The leach field for the septic system was only adequate for two bedrooms. The cost to expand the leach field all of a sudden made this home expensive.
The same client found another house that, based on the price per square foot, should have sold the day it was placed on the market, as it appeared to be the best price I had seen in years and years; however, it had been sitting on the market for a couple of months. It was too good to be true. The issue in this case was also underground, yet inside the house. The house had a “bedroom and bathroom” below grade without any windows, no ventilation and no egress. And this, in my humble option, storage area with carpet, was included in the living square footage. When asked, the seller said, “Over the years our guests enjoyed sleeping there.” Wonderful, but that doesn’t make it real.
This is the reason that in the state of Colorado, we have the “Square Footage Disclosure” that is signed by all parties to every transaction. Recently I represented the seller of a multi-million dollar home. It was appraised twice. Each appraiser came up with a different size. One was higher and the other lower than the county tax records. Which measurement was correct? All of them.
This is best illustrated by 120 Marks Lane in The Highlands in Breckenridge. This home has six bedrooms and four-and-a-half bathrooms at a price of $999,000. All the other homes in the same neighborhood and price range have just three or four bedrooms. The difference? A great design with an efficient use of space. As you can see, this home still has a large great room, and comfortably sleeps over 20 people. That makes a comfortable home for family gatherings. That is more important than price per square foot.See you next week. Love life, DanielReach Daniel Webster Johnson at (970) 393-3300 or him drop him a line at Daniel@YourMountainBroker.com. He is a very active, full-time Realtor in Breckenridge, who has earned the national Quality Service Certified Platinum award, recognition of 100 percent client satisfaction. He is one of the team at Resort Brokers Real Estate located at 100 S. Main Street, Breckenridge.