You’ve decided that you’re ready to buy a home! Great decision — it’s a buyer’s market and now is the time to get a great deal! But how in the world do you determine what a great deal is?
A lot of realtor’s use a method called Price Per Square Foot or (PPSF). To get this, take the asking price of the house (say $200,000) and divide it by the number of square feet in the house (let’s say 1,800 SF).
So, in this example, the asking price of the house is approximately $111 per square foot.
The house that you’re interested in is renovated with a nice kitchen and bathrooms (more value) but lacks that awesome garage (less value) that you really wanted. It’s on a nice quiet street (more value) so you won’t be woken up by the rushing noise of passing traffic.
As you can see with this example, the price per square foot gives you a “jumping off” point or a good starting place but then you need to manipulate the figure based on the improvements, location and supply. Are there a lot of houses just like this one (less value) or is it unique (more value).
Beginning to get the picture? The valuation of a home is an art, not a science. You need a realtor who specializes in the market where you’re looking and who has seen thousands of homes to compare it against.
A realtor knows how much to add for the quiet street and can look up homes that’ve sold recently (within the last 4 months — essential to pick recent sales in this rapidly changing market) as comparisons.
Sometimes, things cannot be reduced to a simple equation — there’s the BIG picture to be factored in — how quickly do you need a home? Do you LOVE this one? — the advice of a realtor specializing in the area where you’re looking can guide you to a proper evaluation of price.