Cost Per Square Feet

It seems to me that in the last few years I’ve worked with a lot of clients who have placed a great deal of faith in cost per square foot analysis when it comes to determining the value of a given property. That’s not too big of a surprise given the experience we all went through over the last ten years or so of overbidding and general insanity, huh? The problem is that I hear people misjudge the value of a property often buy using cost per square foot analysis as the basis of where they think a home should sell.

The bottom line for me is simply the fact that there are far too many variables in determining value and many of them are more important than simply cost per square feet. For example, last year the house at 340 Bodega sold for $875,000. It was listed for $849,000 and got 5 offers. That brings it in at $683.00 per square feet…the highest cost per square footage sale in Foster City in 2010. Oddly enough, the second highest came at 300 Bodega which sold for $830,000, making it $648.00 per square feet.

Conversely, the wide waterfront at 396 Sailfish closed at $1,396,000 but since it’s 3900 square feet it actually sold for $357.00 per square feet. What does this mean? Do the little 3 bedroom houses on Bodega have more value than big waterfront homes? I think not. There’s plenty of comps for homes near Bodega that would support those values mentioned above. Particularly in light of the wonderful job upgrading those houses that those sellers did. Are the buyers just crazy for spending that much money for those homes? I guess not…340 Bodega had 5 parties competing for it! The truth is that the marketplace thinks that value is warranted. People are willing to pay a higher cost per square footage because they want a single family home in Foster City, don’t care if it’s smaller and appreciated the upgrades that you can see in those links above.

There are plenty of things that effect a home’s value that are more important than the square feet. In Foster City, those things could be proximity to the SFO flight pattern, location at the center of a T intersection, location vis-a-vis the high tension power lines, the amount of upgrades at the home, the amount of the project’s HOA dues and the lot size. There’s a bunch of others as well. Of course, this principle holds true for every community. Comparing cost per square is interesting, but at the end of the day not all that important when it comes to really, truly determining what a home is worth.

Comments

  1. Can the city do something about airplane encroachment? It seems more areas in Foster city are affected by airplanes than a few years ago. If the trend continues, all of the city could be under airplane paths.

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