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How should we use Price per Square Foot
to derive our purchase/list prices?
The Price per
Square Foot generated from MLS provides
an average Sold Price per Square foot
for selected sold properties and average
Listed Price per Square foot for
selected Active and Pending properties.
No absolutely not.
The Price per Square Foot generated CMA
does not account for many factors that
are important and should be included in
a real CMA such as: condition of the
house, upgrades, age, builders, size,
layouts and floor plan, location of the
house in neighborhood, and many more.
All these factors need to be adjusted
for all properties to match with the
subject property.
Assuming all other
factor are the same, Price per Square
Foot could be used as guideline but not
enforce or derive the purchase price or
listing price. See the following
examples:
Size Square
Footage: Buy size and layout I mean
you should not compare for example the
$price per square foot for a condo with
600 Sq Ft with another condo having 1300
Sq Ft. This needs adjustment.
Assuming all other
factors are the same; the smaller size
houses, condos, etc. always have much
more price/sq ft. than larger size
house. The one-story houses always have
more price/sq ft. than 2- or 3-story
houses.
 The
shape and layouts: Are important too.
Assuming all other factors including
Square Footage are the same; the floor
plan, layouts and useable spaces are big
factors and needs to be adjusted. For
example:
 In
this example, both property have
70*30=210 Sq. Ft.
They are both 1-story, but it is obvious
property 1 with 70 sq, ft. frontage has
more value the second one with 30 sq.
ft. frontage.
70
sq ft. 30 sq
ft
   Example
2: 1-Story vs. 2-Story:
1-Story
2-Story
In this example, , both property
have 70*30=210 Sq. Ft. But it is
obvious that the 1-story property
has more value than the 2-story
property.
Example 3: In some
cases, the shape of the land and floor
plan for two different properties with
the same area square footage makes a
different value. e.g.,
  
They all have
different values and depending the
usage, view, etc could be higher or
lower values.
What is the
solution?
All these
discrepancies and difference should
manually be adjusted for each compared
property to bring all properties to the
same level for comparison purposes.
How to adjust
values? The adjustment values are
different for each type of property,
location, price range, type of addition
or deletion, etc. Try to talk to your
local appraisal to get the latest number
in your area. You may visit my website
www.TexasFiveStarRealty.com or click
here to see some suggested
adjustments value for properties in
north Texas.
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