DOES "PRICE PER SQUARE FOOT" MEAN ANYTHING IN RESIDENTIAL SALES?
I had a buyer contact me last week and I referred her to a new member of my team while I was on vacation. She has taken a stance on the idea that we were not doing our job. Why? Because we do NOT evaluate a property for her by price per square foot. Emails were flying back and forth between the buyer and the agent and when I saw the last one, where the buyer called the agent on the fact that "square footage DOES matter in both New york City and the Hamptons", I stepped in.
As I was reading these emails between the buyer and the agent, I could see a familiar situation taking place: buyers who come from the financial world want to crunch numbers like they do in their billion dollar deals....they don't see that the price per square foot varies to such a degree that residential real estate is almost impossible to use this measure of value. Size does matter, however, other things matter more...and must be considered first. My team member tried her best to do as she was asked but came up with nothing that would satisfy this buyer.
So, I intervened; I gave this buyer a list of reasons why we cannot use price per square foot as a measure of value...I wonder if you agree with these? If you have other reasons, I could certainly use them!
HERE ARE THE REASONS WHY YOU CAN NOT USE PRICE PER SQUARE FOOT:
- Location: A condo development near the ocean is much different in price than one further away.
- Condition of the market: Market conditions influence prices more than the size of a house.
- Condition of the house: A house in original condition can not be priced as a brand new house of the same size.
- Number of bedrooms: The bedroom count is a bigger determinant of price than the size of the house.
- Size of lot: A house on an acre is going to be priced higher than one on a .33 acre.
- NOTE: Price per square foot may be used by an appraiser, however, location and condition supersedes cost per square foot.
In the case of condos, or co-ops, a price per square foot evaluation means something ONLY within the condos in that condo development---other condos that are located in another location are priced differently. And in the case of New York City, the same applies--I worked there for years and I know that square footage means very little in pricing.
Now I have a buyer and an agent who will not question that thinking any more--both have an understanding that they did not have before and unless I am missing something, that should put to bed any idea that we need to be taking price per square foot as the key to a good price determinant.
PLEASE LET ME KNOW IF YOU HAVE A DIFFERENT IDEA AS TO PRICING THIS WAY FOR RESIDENTIAL REAL ESTATE.
**ALL INFORMATION AND CONTENT IN THIS BLOG IS ORIGINAL TO PAULA I. HATHAWAY. The views expressed herein are my personal views and do not reflect the views of Douglas Elliman Real Estate
Paula I. Hathaway, Senior Broker Associate, Douglas Elliman Real Estate
Southamtpon Village Real Estate Specialist since 1995; Also Specializes in North Sea, Noyac, Water Mill and Bridgehampton, New York
Diamond , Gold and Chairman's Circle Awards; Top Producer since 2005
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