“Hi Gary. We’ve found a beautiful La Jolla home on a canyon, but it’s way overpriced. The sellers won’t go below $397 per square foot, but homes in the area are selling for around $350 per square foot…”
Stop. You’re falling for a fallacy that traps many homebuyers, homesellers, and a whole lot of real estate agents.
Price per square foot is NOT how to determine value.
(Let’s call it “PPSF” for brevity)
By its very nature, PPSF only measures home size and completely ignores little details such as:
– Design and appeal
– Lot size
– Everything else
Would you pay a premium for a huge, 5000 sqft house…that has only one bedroom, is utterly dilapidated, ugly curb appeal, has no yard, black walls, and no heating or garage?
Oh, did I mention it’s also under the freeway, on a busy street next to a junk yard and a chicken farm?
And it’s haunted.
You say you would NOT pay extra for it?!
Hmmm…according to the PPSF people, you would be a fool. I mean, didn’t you see that it’s 5,000 square feet?!
Okay, so that’s a slight exaggeration to prove the point that using square footage to determine value just does not work.
But here’s a real world example:
Two months ago an agent brought an offer on one of my listings.
The home had sweeping, unobstructable bay and ocean views. It also had a fabulous location on a quiet culdesac with many newer custom homes.
Unfortunately, the agent used PPSF to advise his clients on the value and what price to pay. By ignoring all the benefits above and beyond size, his clients wouldn’t pay a realistic price, and missed out on a home they really wanted.
We sold it a week later at fair market value for a much higher price.