How To Use Price Per Square Foot Correctly
Pricing per square foot is a commonly used method in home sales. Even when a homeowner logs on to Zillow they will see an estimate of the price of their home. This is based on the average price per square foot of homes in their neighborhood as it relates to the number of square feet in their house. It’s important to let homeowners know that there’s more than that simple algorithm to pricing a home to sell while also making a good profit.
To calculate the price per square foot you need to know:
- The Cost Of The Home
- Square Footage of the House
Once you know this data you simply multiply the numbers:
Cost x Square Footage = Price per Square Foot
Size Is Not Everything
You now have a great equation model for understanding the economics of a town by neighborhood. However, sometimes pricing solely by square footage can do you wrong. The size of a home is a good way to the ballpark about where a home price might lie. Because two houses are rarely the same. What this equation does is make an assumption. It assumes that the home’s only value is offered by the size. However, many homeowners have renovated and upgraded the space. On top of this, you’ve discounted the acreage that your land sits on. With millennial homebuyers focusing on larger properties where they can grow food and utilize the land, overlooking frontage and acreage when pricing is a huge mistake. Essentially, using a price per square foot pricing model incorrectly can lead to an asking price that is simply too low.
Correctly Pricing Per Square Foot
Though it’s fun to use pricing calculators online, basing solely on this can often lead to getting less than a property is worth. The best way to use a pricing per square foot model is to start with the basic equation as a foundation while continuing to evaluate the property.
Increase the home value for features like:
- Built-in Pool
- Bathroom Upgrades
- New Kitchen Appliances
- Specialty Hardwood, Marble, or Tile Floors
- Etc. Etc. Etc.
Frankly, there are tons of upgrades and amenities that can drive up the price of a home. Utilizing pricing per square foot correctly means doing more than just using this tool. A good realtor uses this home pricing equation to understand the general average of homes for sale in the area but doesn’t rely solely on this number.
Hire An Appraiser
While a real estate agent will know what monetary value specific home features will add to the price, some prefer to bring in an appraiser to be sure they aren’t missing anything. These two professionals generally do work with the same kind of information but their business acumen is slightly different. For a newer agent who wants to bring on an appraiser, we recommend using advanced commissions from reliable companies to find the funds. Being a good seller sometimes means knowing when to call in some help. An appraiser can be an essential part when pricing a super custom home.
Pricing per square foot is reliable for some uses, but when it comes to pricing a home for sale there are more steps to the equation. Take individuality into account alongside the equation we laid out above. Then watch the offers roll in on your well-priced, quick-to-sell property!