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More on Price Per Square Foot

by Connie Yoshimura

     My article two weeks ago on evaluating homes on a price per square foot basis created some controversy as a result of misinformation on my part and for that I apologize. The public website of Alaska MLS does NOT have a field for price per square foot and so that calculation is not available to the public and is not syndicated by MLS to other national portals.  The price per square foot is available as a tool only to members of MLS.  However, I stand by my premise that the tool is broken and price per square foot is often a very inaccurate way to value property either by real estate professionals or private buyers and sellers.

     Price per square foot is a lazy person’s way of evaluating either a home or a piece of land.  Let’s get away from the ‘home’ controversy and use another example. A lot is being considered for potential development as a small office building.  It is properly zoned R0. Check.  You hire an architect and his research indicates that the size of the building the client wants to build will fit on the lot.  Check. You hire an engineer who tells you that you will need to pave the alley behind the property and that the MOA will take an additional 15 to 30 feet of frontage off the front of the lot for street improvements to full urban standards with curb, gutter and sidewalk. Also, he tells you after visiting with AWWU that the water pipe in the street is undersized and will have to be increased from six inch to eight inch plus the cost of the pigtails into the lot.   

     You really want this property and so you adjust your pro forma and keep going, spending dollars on due diligence.  An environmental phase one  shows a buried fuel tank and the home on the property  built in l952 has asbestos.  Maybe the fuel hasn’t spread too far.  But, in the far northeast corner of the lot, there is a standing pool of water about three inches deep which MOA and the environmental engineer you’ve had to hire  has designated as Class B wetlands. Not good. The lot is heavily forested and the cost for clearing is $15,000 per acre.  At this point, the price per square foot has become totally meaningless and yet it is listed for sale at $28 per square foot. This scenario is an overly aggressive example of some of the potential development costs that have to be considered when establishing land value.  However, it is no different than trying to evaluate a home by its price per square foot which can range in today’s market from $150 to over $300 per square foot.  There, even I did it! 

     So the next time someone quotes you a price per square foot for a home or a piece of land ask them, “What else can you tell me about the property?”.    

Price Per Square Foot? Better take a Closer Look

by Connie Yoshimura

     One common mistake buyers  make when considering a home purchase, whether pre-owned or brand new, is to judge the home  by price per square foot.  And when our local Multiple Listing Service created a field for price per square foot on its listing form, allowing buyers to search online specifically by price per square foot, the same they would for  number of bedrooms and type of garage,  it did  a disservice to both buyers and sellers.  Price per square foot does not take into consideration whether or not the home has a two-story entry or great room, vaulted or cathedral ceilings or the three different ways stairwells are often measured.  Some appraisers count only the first floor area of the stairs; some count both floors, and others don’t count any. Plus, newer homes frequently have higher ceilings.  Builders have been creating vertical space by raising the ceiling height of the first floor from eight feet to nine or ten, creating vertical space.  Price per square foot doesn’t take into account any of these factors.

     Then, there is the issue of counting square footage in a condo.  Technically, a full service condo is interior paint to interior paint. In other words, you’re buying the interior air space of your condo.  However, we have site condos where the condo is enveloped in an air space around the exterior.  Those condos, which can include single family homes built as condos, measure outside wall to outside wall.  Some developers will identify  square footage exterior wall to exterior wall with a simple disclaimer as to how they measured, creating even more confusion, when trying to judge market value by square footage alone.

     Home designers use different software, some of which measures square footage exterior to exterior and some which  measures only the interior of the rooms. The MOA values a building permit based upon the square footage of the plan submitted.  However, that may also not be totally accurate because the builder may have decided thirty years ago while on site to cantilever the upstairs back wall and not report it to the MOA.  That square footage stays with the home for its lifetime. 

     All these different ways to measure square footage ends up on the MLS form and then is divided into the asking price.  A buyer searching online  may reject a property as being unfairly priced based on the cost per square foot when in reality, how the measurements were created for each property are different.   Today, virtually all buyers shop online before ending up with a realtor or at an open house.  It is not unusual for realtors to hear, ”This home seems larger or more spacious than I thought” or  “It’s smaller than I imagined.”  That could be due to inaccurate measurement 30 years ago, software design differences or an appraiser’s opinion on how to value stairwells and yet that price per square foot has now gone out to the world, i.e. Point to Point, Zillow, Trulia, realtor.com, Homes and Land,Homefinder.com, Yahoo.com, and a plethora of other sites. The Alaska MLS  form has limited space for additional comments on property amenities.  Sellers, who are the backbone of MLS and the reason for its existence, should insist this field be taken off the form.  It is a disservice to them and the buyers who are searching www.alaskarealestate.com.   

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Dwell Realty
3230 C Street Suite 100
Anchorage AK 99503
907-646-3600