Valuation: Price Per Square Foot is only Part of the Answer
Category : Laguna Beach Real Estate
As many of you know who have looked at houses with me, that I’m big on using ‘price per square foot’ as a valuation tool. Many times too much so, since if you’re not used to looking at valuations that way, the barrage of numbers can be overwhelming at times.
But it gives me a ‘reference point’ as to whether you’re getting the deal you want. And that is what EVERYBODY wants – not just a deal but a great deal/steal. So when I see that homes that sold for less than a million are going for an average $600 a square foot I figure these buyers wanted a great deal as well and this is the number they needed to feel they got it.
However, for me the price per square foot is just a starting point because there are other factors besides the square footage of the house. Here are some of the other factors that influence that valuation based on price per SF alone:
- lot size
- back yard size
- amount of remodeling
- care for the home
- whether the street is a good one or full of parked cars
- sale type – regular vs distressed
- amount of down payment
- whether it’s all cash, conventional financing or if the seller carries a note
The variance from “all original” to “all remodeled” alone can swing value 10% in the OC coastal area, 15% or even in rare cases 20%. Add to that other factors and the divergence in value can be much, much greater.
Additionally in Laguna, smaller homes tend to sell for more on a per square footage basis than larger houses. The reason why is that kitchens and bathrooms are the most expensive rooms, but often there is just 1 kitchen and a similar number of baths with smaller vs larger homes.
My feeling is that the average price per square foot is the middle of the viable range between “total fixer, probably needs to be demo’d” to “completely remodeled or brand new home”. Most of the time, the “range” is about 15% from fixer to fixed.
The bottom line is that the odds are that if you are buying in today’s market, you’re a student of the market looking at the mls information I send you, and with the numerous houses we’ve seen you’ll develop an emotional feel of the value of the property as well.