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“Price Per Square Foot” and Pigs Wearing Lipstick

The Real Deal

Everything Real Estate in the San Fernando Valley
Friday September 21, 2018
“Price Per Square Foot” and Pigs Wearing Lipstick

        There are many methods of quantifying the value of a home, one of most intellectually dishonest methods is the “price per square foot” measurement. While this information does give you one way of differentiating houses at a similar price range, “price per square foot” is a lot like putting lipstick on a pig; it just dresses up something ugly in a futile effort to make it seem better.

        At the outset, “price per square foot” is not remotely close to the most accurate measure of a home’s value because all homes have unique variations that add or subtract from the home’s value. This article will discuss three variables that effect a home’s value and are far more useful than the “price per square foot” metric. First, let’s talk about why “price per square foot” is a cheap trick that doesn’t actually gauge value.

1. “Price Per Square Foot” is a Bad Metric

        It is a matter of common knowledge that homes have different architectural styles, both on the exterior and the interior. Further, homes come with different benefits (pool, hot tub, guest house, etc.), and are built in different locations (Studio City or Calabasas as opposed to Reseda). Naturally, each of these variables has a significant impact on the value of home.

        Further, the “price per square foot” metric is incapable of taking other variables such as renovations (a completely remodeled kitchen for example) into account. As such, two homes could be the exact same size, at the exact same price, yet one may be a far better home; woe to the foolish homebuyer who believes “price per square foot” is the only metric to follow.

So what metric should a prospective homebuyer look at to determine a home’s true value?

2. Look at Comparable Home Sales in the Vicinity

        Comparing the value of similar homes seems like a common-sense approach to determining the true value of your home but isn’t always done properly. For example, you can’t compare the price of your home to your new neighbor’s home if you have a one-story ranch home, and they have a two-story townhouse; make sure to compare your property to other properties with similar features in your area. Next, remove homes of similar style that do not have the same features as yours (bedrooms, bathrooms, size of garage, renovations, HVAC systems, etc.). Comparing similar properties, with similar features, in the same area is a far better method of determining a home’s value that the rudimentary “price per square foot” measure.

3. You Can Perform Research on Comparable Home Sales on Your Own

        What’s great about the comparable sales metric (“comps”), is that you can do most of the leg work on your own; which will inform your decision on whether or not to reach out to a real estate agent in the first place. Look up previous listings in your area, or search through your city’s Public Records Office. Like most things however, having professional assistance is your best bet at success. Sure, someone could litigate their own case, and maybe even win, but using professional help would have made the process easier and much more likely to be successful.

You should contact licensed real estate agents to obtain a Comparable Market Analysis (“CMA”), which generally looks at homes that:

A. Are in a similar location;
B. Are a similar size;
C. Have a similar number of bedrooms and bathrooms;
D. Are in similar condition;
E. Have similar amenities; and
F. Have a similar lot

This last suggestion is going to blow a few minds. If you want to get a very accurate measurement of the value of a home…. Have it appraised!

        At the Chernov Team we take pride in keeping up with the market in Studio City, Encino, Sherman Oaks, and other locations throughout the San Fernando Valley; knowledge is power. At the Chernov Team we understand that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves with the most.

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