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How is Price Per Square Footage Determined

We recently had an appraisal on our home.  The price per square footage came back low (causing the appraisal to come back lower than expected) while other homes in the area that are smaller in size seem to have sold at a higher price per square footage.  The home has been updated considerably.  We have recently completed new construction all around our 1100 square foot home which now brings us to a 2500 square feet home.   I am curious how the price per square footage is determined.
  • February 18 2014 - West Covina
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Answers (2)

An appraiser takes your property, the "subject property", and draws comparisons based on MLS information. If you have 2 baths and there is a home similar, but with only 1.5 baths that sold at x amount of $, the appraiser may then add $2,500 or whatever amount they think appropriate, to increase the value of yours or vice versa.  Each differing item on the mls list is either an addition or a subtraction.  They add or subtract a percentage for increasing or declining value.  The same for excellent condition vs average or below average, and quality of construction eg, granite vs formica. 

So it is highly variable.  An appraiser can not see a more flowing floor plan, more effective use of space, or other more subjective things. 

They can not see that a house took a year to close in a rising market, because of a legal issue as an example.  They can't see how well their comps were marketed. 

and Appraisers are not always right. 

If you feel the valuation was low, try to find some similar homes, in similar condition, that are nearby that have either appraised or sold for a value more than your own, in the VERY recent past.  If you think a house used as a comp for your appraisal was sold for lower than value, call the listing agent and find out why. 

If you know your neighbors whose homes you know well enough to judge, ask them if they have been appraised recently for refinance.  

I agree with wetdags, in that the smaller the house, the higher the price per square foot, all other things being equal.
  • February 19 2014
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Profile picture for wetdawgs
Price per square footage is not a  primary number used in determing home value, but instead is back calculated from the total value.   All other things being equal (location, lot size, views, quality etc), a smaller home will have a higher price per square footage than a larger home.  This is true starting with construction costs.    A two story home will be lower $/sq ft than the same size one story home (also true for construction costs).     Price per square foot is also confounded because the whole house value includes the lot value.   In addition, having the biggest best home in the neighborhood is not a good idea because the value will be pulled down the neighborhood. It is better to have the tiniest, roughest home in the neighborhood to have the value pulled up by the neighbors.

Ideally your appraiser included his/her logic and comps in the appraisal report so you can see if you consider those fair.

  • February 18 2014
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