Don’t use price/psf alone to determine value

Posted by Jace

January 30, 2009

When you’re hunting for Boise real estate deals, be sure to understand that price per square foot alone is not a good estimator of value. I find that many people too quickly jump to price per square foot without considering the factors that affect a homes value. Price per square foot is only a reasonable measure to use when:

The total square footage is similar. All other things held equal, a 1500 square feet home is not a good comparison to 2500 square foot home. Smaller homes have a higher price per square foot because the land value has more of an influence and larger homes have economies of scale.
Similar quality and finishes. A home with hardwood, granite, tile walk-in shower, etc. is going to have a higher price per square foot than a house with no upgrades.
Layout and design. You want to compare single levels with single levels, two stories with two stories, etc. Single level homes have the highest price per square foot.
Lot size. A house that’s on a large lot is going to have a higher price per square foot.
External influences. Does the house back to an interstate, is it in a bad neighborhood, next an airport, etc.?
Location. A home in North Boise is not a good comparison to a home in Meridian.
Physical deterioration. Is the house damaged, need a new roof, HVAC, etc?
Functional obsolesce. This is the appraisal term for a home that has a design that does not appeal to today’s buyer. For example, a 1 bathroom home where guests must go through the master bedroom to use the only bathroom.
Etc.

What we’re really talking about is having good comparables. There are many influences to a homes value and all these must be taken into consideration. If the homes are truly comparable, then price per square foot is an excellent meaurement to use.

Search Boise real estate and the surrounding areas of Meridian, Eagle, Star, etc.

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