Posts Tagged ‘Square foot’

THE $$$$$$$$’s Per/Sq Foot PUZZLE

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A Recent Buyer client was continually comparing different listed houses on the the basis of ASKING PRICE per SQUARE FOOTAGE of living space. At 1st sight this seems perfectly reasonable. He could not understand why there seemed to be NO evidence of this when looking at SOLD prices. i.e. Bigger houses seemed to sell for FEWER dollars per square foot than smaller ones.

However, once we understand how houses are built it really does make sense.

Assume 2 house built at the same time are both 3 bed 2 bath models and 1,200 sq feet living area.

They were both sold new for $400.000. Therefore, when sold, they cost the Buyers $333 per sq ft.

At this time the $$$$$$$$ per sq footage is a valid indication of comparitive value.

Now consider which parts of a new house are the most expensive to build?

How about the Kitchen and Bathrooms with all the high cost plumbing and electrical systems which are not required in the other parts of the house.

1 year later one of the owners decides to add a 400 Sq Ft extension to his family room. As the new consruction does not include any new plumbing and little electrical work the cost per sq ft of the project will obviously be less than that of the complete house.

From this point on the $$$$$$ per sq foot calculation becomes meaningless

The larger house will have a lower $$$$$$$ per sq footage because a a larger part of it cost less to build.

 

 

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