• Jesse Ledbetter

Price per square foot... and baking.

Imagine having someone offer you a slice of fruit pie, sight unseen. You ask the question, "How did you make it?" and they reply, "Fruit pie." This extremely vague answer would 1) not answer your question, and 2) raise questions of "is this person trying to pull one over on me?" Follow along to find out what is "baked into" price per square foot, and why it's not often a very helpful tool.

Price per square foot is a very simple measurement, in which the sales price is divided by the above-grade living area of the home, but a home is far more than these two things. The above grade living area of the home represents the following according to Marshall and Swift:

This of course only represents the physical improvement of the home and neglects the following two major components:

So, price per square foot is only a useful tool if:

  1. The location/view of the properties are identical

  2. The land is identical

  3. All features of the home's finish are identical, including size.

This is why price per square foot is a nearly useless tool in all cases except for newly constructed Condo plans (ie. none of the properties have land, most are relatively identical in location (though even this can differ) and the units tend to be very similar.

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