Using dollars per square feet ($/SF) may be the most misunderstood area of real estate. It’s not unusual for me to meet with a client and have them say something like “My neighbor’s home is 1,800 square feet and it sold for $310,000. My home is 3,600 square feet so it’s worth $620,000.”
But, that’s not how real estate works. In general a smaller home will sell for a higher $/SF. I’ve always had a hard time explaining that until I was meeting with a couple at the neighborhood coffee shop.
We each had a different size cup of coffee and each cup had a different price. You can see the smallest cup of coffee cost $.32 per ounce. The last 4 ounces for the largest cup only cost $.12 per ounce. The larger the cup of coffee the lower the cost per ounce.
The same principle applies to real estate. Many of the costs to build a home will be the same regardless of the size of the home. From the cost to develop the lot to the cost to build the kitchen and master bath there may not be significant differences between a small and large home. A smaller one story home may even have higher costs as the foundation and roof can be larger than a 2 story home.
A good way to see this is to stop by a new home model office and look at the base price and the options. A new home may have a base price of $175/SF with an optional game room that only costs $60/SF.
Whether you are buying or selling understanding how and when to use $/SF will keep you from making big mistakes when pricing a home. If you’d like to talk about $/SF impacts your home or if you’d just like to have a cup of coffee call/text 512-791-7473 or shoot me an email at email@example.com.