NachoPerito
Senior Member
- Joined
- Jul 25, 2012
- Professional Status
- Certified General Appraiser
- State
- Washington
There has been some debate over this so I decided to do some analysis. This is regarding the price per sq ft adjustment for a standard SFR appraisal.
I did two different tests.
The first was looking at a a new residential plat development that was selling out homes as they built them. They had a few designs. The 1400 sq ft and 1670 sq ft plan both had two sales. Otherwise the homes were very similar: same style, same size garage, same quality (same builder), same # of bathrooms, the bedrooms were different (3 vs 4).
Averaging out the prices for each plan the buyer paid on average $18,112 for the additional 270 sq ft or $67.08 per square foot. The house sales averaged $161.32/SF overall (land and building). The additional square feet was 42% of the overall price per square foot.
Second analysis i had six new homes that sold ranging from 2000 to 2800 sq ft. All were similar in garages, style, # of baths, lot size. same builder, etc. All were next to each other. I plotted those six sales on a price per square foot basis and used a trendline to figure out how much was paid as the houses got larger. The numbers turned out to be tight. A difference in 800 sq ft was additional price of $43,671 or $54.59/SF. Average price for all homes was $126.07/SF. The additional area was purchased at 43% the total sale price.
The two scenarios reflected an adjustment of 42% to 43% of the sale prices per square foot.
We had knowledge on land values for both projects and the land value ratio was 20% of 23% of the overall value.
I understand this isn't the correct adjustment for all scenarios (for example, older homes have depreciated, sometimes the additional square footage is a useless bonus room that nobody uses, land value can be a substantial portion of the overall value, etc etc). My analysis reflected a tight range that usually will be wider, but it just turned out this way. These were new homes and there were some minor differences in things thrown in, but using multiple sales (4 in one analysis, 6 in the other) limited that variation. This was a simple new development so other variables with some new plats don't apply here.
This is meant to be a starting point not an ending point.
This suggests that in a lot of cases an adjustment of $30/SF for differences in square footage is low It would only be right if the comps were selling at $70/SF. Those are some cheap houses.
PM me if you want to see the spreadsheet.
I did two different tests.
The first was looking at a a new residential plat development that was selling out homes as they built them. They had a few designs. The 1400 sq ft and 1670 sq ft plan both had two sales. Otherwise the homes were very similar: same style, same size garage, same quality (same builder), same # of bathrooms, the bedrooms were different (3 vs 4).
Averaging out the prices for each plan the buyer paid on average $18,112 for the additional 270 sq ft or $67.08 per square foot. The house sales averaged $161.32/SF overall (land and building). The additional square feet was 42% of the overall price per square foot.
Second analysis i had six new homes that sold ranging from 2000 to 2800 sq ft. All were similar in garages, style, # of baths, lot size. same builder, etc. All were next to each other. I plotted those six sales on a price per square foot basis and used a trendline to figure out how much was paid as the houses got larger. The numbers turned out to be tight. A difference in 800 sq ft was additional price of $43,671 or $54.59/SF. Average price for all homes was $126.07/SF. The additional area was purchased at 43% the total sale price.
The two scenarios reflected an adjustment of 42% to 43% of the sale prices per square foot.
We had knowledge on land values for both projects and the land value ratio was 20% of 23% of the overall value.
I understand this isn't the correct adjustment for all scenarios (for example, older homes have depreciated, sometimes the additional square footage is a useless bonus room that nobody uses, land value can be a substantial portion of the overall value, etc etc). My analysis reflected a tight range that usually will be wider, but it just turned out this way. These were new homes and there were some minor differences in things thrown in, but using multiple sales (4 in one analysis, 6 in the other) limited that variation. This was a simple new development so other variables with some new plats don't apply here.
This is meant to be a starting point not an ending point.
This suggests that in a lot of cases an adjustment of $30/SF for differences in square footage is low It would only be right if the comps were selling at $70/SF. Those are some cheap houses.
PM me if you want to see the spreadsheet.
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