Price Per Square Foot?

[Mark K]

It is a curiosity that buyers and sellers still manage to come to a market value when their heuristic is just, "I like this house better than the previous house. It is better deal than the nicer but more expensive house we saw this morning." Price Per House is the unit of comparison. This, yet, encompasses the hundreds of fuzzy attributes.

This is it in a nutshell. Having owned a brokerage office and sold houses for a few years proved this to me.

Buyers don't look and analyze a house with a $/sf in mind. They don't say "this house is only $125/s.f. but I like it better than the house that's $130/s.f.

They may use the $/sf approach to weed out some homes prior to looking (too high/too low) but in the long run buyers like and base their buying decisions on color schemes, floor plan layouts, bedroom/bath/closet sizes, location, bigger back yard, new appliances, 9' ceiling instead of 8', etc.

Realtors like using $/sf because its an easy (and lazy) way to try to sell homes to uninformed buyers.

 

[DWiley]

As I used to say in that presentation I referenced earlier, looking at $/SF is better than not looking at anything, but not much

 

[J Grant]

A small denominator makes the small houses sell high per sf. The higher quality materials and willingness/ability to spend money on maintenance make the larger homes more valuable per sf.

It is a curiosity that buyers and sellers still manage to come to a market value when their heuristic is just, "I like this house better than the previous house. It is better deal than the nicer but more expensive house we saw this morning." Price Per House is the unit of comparison. This, yet, encompasses the hundreds of fuzzy attributes.

Do buyers and sellers manage to come to a market value, or do they manage to come to a price?

Buyers and sellers agree to a price. We appraisers if engaged , provide our opinion of market value for the sale property. Our opinion of market value may or may not match their price.

 

[J Grant]

$ per sf is one form of analysis. We can use it and refine it if we wish, Mark described the way RE agents typically use it, as a lazy way to price property and convince uninformed buyers of the "worth" of a property.

I was a RE sales agent at one time; imo every appraiser would benefit by hanging around a RE office and listening in on SC price negotiations. The concept of "market value " is barely mentioned in a typical negotiation, and if it is, in a general sense. Such as a buyer might ask, " Am I getting this house at market value".? The RE agent responds, Of course! Houses like this are going for $130 a sf! "

 

[Deleted member 128537]

$ per sf is one form of analysis. We can use it and refine it if we wish, Mark described the way RE agents typically use it, as a lazy way to price property and convince uninformed buyers of the "worth" of a property.

I was a RE sales agent at one time; imo every appraiser would benefit by hanging around a RE office and listening in on SC price negotiations. The concept of "market value " is barely mentioned in a typical negotiation, and if it is, in a general sense. Such as a buyer might ask, " Am I getting this house at market value".? The RE agent responds, Of course! Houses like this are going for $130 a sf! "

In Wisconsin we are seeing LOTS of appraisal contingencies in offers; even cash offers. People do not want to over pay. I'm not particularly fond of that. But it does say that buyers are getting a heads up. And the reason I'm not fond of it is that I wish people would get appraisals before they write the offer. But it's kind of a negotiating ploy buy buyers.

 

[Tim The Enchanter]

I only look at $/sf at the end, so if mine is outside the range I can comment.
Otherwise it means doodley squat. I do not use that term in my comment.

 

[jay trotta]

Someone somewhere began talking about SC/Sf, it soon became the "politically correct language" (like skin in the game) when house hunting; the Realtors heard it so much, they didn't want to feel left out, so they began also as a catch phrase (algorithm) and soon it became the appraisers bashing game, because somebody else thought of it first.......razz berries


Still love ya'll

 

[TRESinc]

In Wisconsin we are seeing LOTS of appraisal contingencies in offers; even cash offers. People do not want to over pay. I'm not particularly fond of that. But it does say that buyers are getting a heads up. And the reason I'm not fond of it is that I wish people would get appraisals before they write the offer. But it's kind of a negotiating ploy buy buyers.

i've been seeing appraisal contingencies in contracts for quite a few years now, pretty much since the crash. it doesn't concern me one bit as i am unbiased and (not trying to be mean here but) i don't care if the sale consummates or not. they could write that the contract is contingent on the moon being full for at least 3 weeks in a row or that everyone must be naked when the contract is signed for all i care, it would affect my appraisal just as much as an appraisal contingency would.

 

[CindyR]

our standard AZ Assoc of Realtors contract (used in 99.9% of all sales) includes an appraisal contingency. every once in a blue moon someone waives the appraisal contingency. That was more common in the pre-crash days. Have never seen the naked signing contingency but never say never...

 

[Flakey]

Recently, I've had two refinance appraisals where both homeowners had built additions and were upset with me because I did not value the additional GLA at $/SF. Neither had bothered to find out before construction how the addition would influence the value. One called me and began cursing. I reported his behaviour to my client. The other called his LO and asked if he could talk with me about how adjustments for GLA were determined. I agreed and we had a very productive conversation about market adjustments.

I really wish the SP/GLA line was not right at the top of the grid. It just invites these types of misunderstandings.