Florida Mortgage Firm
A common error when calculating the value of a home is to take the price per square foot of a comparable home sale and multiply it by the square feet of your home. This is a flawed method that will leave you, your buyers and your listings with an overpriced assumption.In real estate appraising, there is more to it than the price per square foot. For instance, both the value of the lot and the fact that there is a home itself (inherent value) are factors. There are other attributes, as well, included in the price per square foot of comparable homes.
If this makes you wary, then ask yourself this: If your home is larger, does that make the lot worth more? If the home is larger, is its garage worth more even if both garages are the same size?
Here’s the way the price per square foot is approached by an appraiser. If your “comps” (comparable home sales) were sold within the last six months and are of close proximity, then an adjustment is made to the features of the comps that are either superior or inferior.
Disparities in square footage are typically only calculated after there is a 100-square-foot difference between your home and a comp. In some markets, that difference is given between $35 and $45 per square foot. So if your home has 200 extra square feet, it is only given roughly $7,000 toward its appraised value. Below is an example.
|Square Feet||Sold Price||PPSQ Feet||Disparity||Added Value||Appraised Value|
|1,200||N/A||?||200 sq. ft.
(1,200 – 1,000)
|$35 x 200sq. ft. = $7,000||$107,000|
|Neighbor’s House (The Comp)||1,000||$100,000||$100||0||$100,000|