Market Insights: Warning: Price per foot can be misleading
October 12, 2012
Way, way too many buyers and sellers get hung up on the price per square foot of a property. It appears to be a quick and easy way to evaluate if a property is a good value, however my experience proves otherwise.
In Summit County (on the most common MLS info sheet), just to the right of the “List Price,” is the “List Price per SqFt:” The number after this is the price divided by the size of the property as reported by the Realtor. Years ago this became such an issue that every buyer and seller in Colorado must, before closing, sign the “square footage disclosure,” a Colorado Real Estate Commission-approved form. On this one page are offered nine different ways to measure or disclose the size of a property! Nine – an indication of just how confusing square footage can be.
When you sign a square footage disclosure you are stating you accept the size of the property as reported by the Realtor. And with a minimum of nine ways to provide this info, you need to be aware this info can be fudged. Read the form and ask questions.
I have seen plenty of homes that based on the price per foot only appear a great, great deal. Yet the design is poor and there is plenty of wasted space. To illustrate the point, if you want a smaller master bedroom and large common spaces, is a home with an extra-large master bedroom good value? No. Or how about hallways? These are included in the square footage, however what are they worth? Not much if you ask me, they just make the price-per-foot calculation look appealing.
This example comes from a couple of years ago. I was selling the $2,000,000+ home in the photos above. On the square footage disclosure form we disclosed the size of the home as measured and reported by the assessor’s office (the most common source in Summit County). In the process of the transaction, two appraisals were completed. We had a total of four different sources of the size of this home; two appraisals, the assessor’s size and the building plans. As the heading states, every single one was different. So how big really is this home? It all depends on who you ask.
Buyers: When comparing properties be 100 percent certain you are comparing ‘apples to apples.’ I recommend you use the assessor’s office records as your ‘apples.’
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Sellers: Don’t get the idea that finding a measurement/source that makes your property way larger than it actually is will benefit you. Sorry, buyers are too smart. My best advice is, in the majority of cases, disclose the assessor’s office records. If you disagree with this measurement, talk and get it corrected.
Daniel Webster Johnson wants your feedback. What did you think of this article? Please call or text him at (970) 393-3300 or drop him a line at Daniel@YourMountainBroker.com. He is a broker associate at Resort Brokers Real Estate, Breckenridge.