The Per Square Foot Pricing Myth

Posted by Derrik Carlson on Thursday, March 5th, 2015 at 10:58am



For the last few years, with the majority of properties sold, the real estate industry has become reliant on using the cost per square foot of a home as a gauge of value.  This tactic soon spread to the public, and is now prevalent in property searches.  This method is however, very dangerous and CANNOT accurately portray the real value of any property for several reasons.  Price per square foot IS accurate and very useful once certain thins are known so that we can compare apples to apples.

Here is what unqualified price per square food DOES NOT account for - you decide if these things might matter.

    1.  Architectural style and shape of the home - the more detail the more the cost.  Slab-on-grade (single story, flat foundation), multiple-story, walk-out basements, regular basements, and split level homes each have their own cost to build.  Square, boxy homes with little detail are much cheaper to build than those with varied roof pitches, curves or creative footprints.  

2.  Finishes.  The surfaces in a home account for a significant portion of the cost to construct.  This means that flooring, cabinets, counters, paint, stucco, brick, rock, etc. matter...A LOT.  Here is a very simple look at costing.  

  • Flooring- Carpet, stone, hardwood, laminates, and concrete all vary dramatically in cost.  Travertine for example can run from about $1.50 per square foot to over $10. 
  • Woodwork/Cabinets- Type of wood, stain and finish, and detail work all factor into the cost.  An exotic wood cabinet door can be ten times more expensive than a simple one.
  • Counters- Granite is the norm today, but there are several grades of granite and the more exotic versions can be up to seven times more expensive.  Even surfaces like Formica can be very expensive.  
  • Paint- Multi-tone paint costs more as do artistic finishes.
  • Fixtures- Handles, knobs, plumbing and lighting - one of the most overlooked costs in a home.  For example, a single bathroom faucet can run anywhere from $25 to well over $2,000.  
  • Windows and Doors- Windows and doors come in a wide variety of quality, size, function, and energy efficiency and can easily add tens of thousand of dollars to a home cost.  
  • Energy Efficiency- How is the home insulated from temperature, sunlight, pests, etc.  A well-built home can cost a lot more, but also offer significant long term savings in operation costs.
  • Landscaping- One of the most expensive elements of a homes.  Landscaping is rarely factored into pricing.  A lush backyard with a pool can add up to 50% to the cost of a small home.  
  • Systems- Heating, cooling, plumbing and electrical all have a wide variety of quality and durability 
  • Lot- Price per square foot also does not account for the size and quality of the lot. 

It is my responsibility to educate my clients so that the value of their home is determined with accuracy.Price per square foot can be very helpful once a substantial portion of the above factors are known and when the homes in comparison are adequately evaluated first.  

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