What’s the Cost Per Square Foot?
What’s the cost per square foot? Who cares! It shouldn’t matter. Many real estate professionals continue to quote dollars per square foot. They are their own worst enemy. Builders and appraisers do this as well and it simply does not serve anyone well, especially the home buyer.
So if an agent tells you about two homes, one home is at $250 per square foot and the other $300 per square foot. Obviously the $250 per square foot is the better “deal.” Or is it?
The larger the home, the larger the rooms, the cheaper the square foot cost. If you finish a “bonus” room above a three car garage, that’s a great deal of square feet. Congratulations, your cost per square foot just went down. By the time you add the gymnasium you’ll get to under $100 per square!
Try this: the next time someone asks you what the cost of the home is per square foot, say “it depends.” The borrower or agent who asks will not understand your statement. “It depends on where you are standing. You are in the garage; the dollar per square foot is not expensive, the kitchen on the other hand is much more expensive.” Everyone needs to understand that cost per square foot is a function of the space and the features within it. If the area has appliances, expensive cabinets and hardware, more skilled labor is required; the space simply costs more. Too much value is put into the big box mentality.
And there is the function of space. If a room serves as a media room, a reading room with built-in bookshelves, if it has a built-in Murphy bed, then that space has multiple uses; the value should be greater because of the usability. A room that is just a big space is just a money drain to heat or cool. Don’t forget about the cobwebs.
There is a growing trend to reduce the growth of home size. Buyers are asking for smarter space designed homes. We have hopefully experienced “peak house size” and now can focus on well-designed spaces. Many are realizing that a dining room that is used 3 times a year – sorry four times, forgot that we use it to do our taxes – is not a value or need and not a must-have for resale as previously believed.
In 1950, the average home was 1,140 square feet, by 2015, it bulged to over 2,400 square feet. However recent surveys are showing homes are getting smaller, down to about 2,300 in 2021. But why? Perhaps smaller lots, or perhaps builders are listening to buyers and building smarter homes that are better designed and offer multiple use spaces.
So what’s the dollar-per-square-foot for your car or your boat? Appraisers can use a “quality of construction” adjustment to fairly add these features. Educate the buyers as to the full function of these spaces so that when they ask “what’s the dollar per square foot,” you can say that you can’t compare house to house based on that, you have to compare the quality and functionality of each home.
New homes should cost more per square foot as a rule. New applicates, new roof, meeting the new building and energy codes, the cost of labor and materials (both in demand). Warranties and more.
Look for what’s in the home, not the size. Look for multiple use spaces. An office that doubles as a guest room, a family room that serves as a media and music space. And don’t forget about outdoor living spaces.
Dave Porter, Sales Manager, loanDepot NMLS 3 483876 call 541-708-4020 or email at firstname.lastname@example.org