It’s probably time someone addresses a widely used term that is loosely defined and almost never qualified:  PRICE PER SQUARE FOOT! These four words have developed into a term almost everyone loves to toss into a conversation when talking about real estate as it relates to a city neighborhood.  I rarely hear it used when describing a suburban neighborhood where the price per square foot factor would actually make some sense.  Say you have a two-story home (let’s call it the Belair model) that contains 2,000 square feet.  Let’s assume they were all built on a similar sized lot, have two car garages and full, open basements.  Let’s also say that the neighborhood is about ten years old.  Now, if that Belair, or similar two-story home, sold for $200,000, it easily calculates out to $100 per square foot.  You can make simple dollar adjustments, higher or lower, for things like central air, basement finishing, décor, etc.  But, the bottom line is that the Belair model is selling for about $100 per square foot compared to other two-story homes in that neighborhood.  Even ranch or tri-level styled homes will typically sell at a different price level in the same neighborhood.

Now, let’s talk about PRICE PER SQUARE FOOT and how that term means virtually nothing in most of our city neighborhoods.  You can choose almost any older neighborhood to illustrate the extreme, and yet wonderful, blend of value differences in neighborhoods such as Hilltop, Washington Park, Country Club, Cherry Creek, Park Hill, Lodo, etc.  The obvious considerations when identifying different factors should include but, not be limited to, location, architectural styles, traffic patters, newer construction vs. 50-100 years old, quality of construction, lot sizes, landscaping, updates and remodels, garages (1, 2 or 3/attached or detached), basements (finished/not finished) floor plans and room sizes, curb appeal and maintenance, and did I mention location (even in the same neighborhood or down the street).  These factors can make tremendous differences in the value.  The concept of price per square foot should only be used as a minor gauge in determining the value of a property.  Let’s pretend you’re looking at two bungalows in Washington Park.  They were both built in the 1920’s and let’s presume they’re on the same block and are both 1,200 sq. ft.  However, one is listed for $195,000 ($162.50 per sq. ft.) and the other is $285,000 (or $237.50 per sq. ft.).  Initially, you would probably jump all over the $195,000 property.  But, the better the value for you could very possibly be the more expensive home.  No, I’m not nuts!  Washington Park has plenty of examples of like-kind homes selling for $225 to $250 a foot.  So the higher priced home is not a freak of nature.  It likely has been completely renovated (new and upgraded electrical, plumbing, roof, new kitchen and baths, décor finishes, etc.)  Maybe it includes a wonderfully finished basement, is on a larger, more well landscaped lot, has a better garage arrangement, is surrounded by larger more expensive homes, and various other factors.  Unless you are willing, able and have the time and patients to make the improvements to the $195,000 home, the more expensive one could be the better value.

Many people might feel that a condo or a loft would be easier to talk price per square foot when comparing similar sized homes in the same or nearby building.  Well, it is a little easier, but don’t get carried away there, either.  Many of the same factors will definitely apply; however, there are other important elements to consider also.  Remember location!  Now add the location of the floor and the views.  Does the building have a storage facility?  What is the availability of parking, what kind of amenities are on the premises, and how big is the maintenance fee relative to the benefits?

The long and the not-so-short of all this is; when you are shopping for you new home, work with a knowledgeable realtor and most importantly, choose the home that fits your needs the best and have it be the one that you can envision enjoying the most.  And then, see how it stacks up to its current competition and possibly other like-kind sold properties.  Just compare apples to apples!

Steve Blank
CEO – Real Estate Libraries