Updated September 30, 2021
Table of Contents
What is a square foot?
Common calculation errors
What’s included in a home’s square footage?
How to calculate price per square foot
How to calculate the average price per square foot for multiple homes
How do you know which homes to compare?
Where do you find the data you need?
The dangers of relying on price per square foot in your home search
Should I use price per square foot in my super-duper specific home search?
Price per square foot is a common metric in real estate; many buyers use it to assess a home’s value. But looking at that data alone without some appropriate filtering and context won’t really help you understand whether a house is a good deal or not or how to negotiate with a seller.
Consider the nuances at play when you’re searching for a home, and then do the math that makes sense for your highly specific search. For the most useful metrics, you should be thinking along the lines of: How do you calculate price per square foot for a particular block, area, or neighborhood — or for recent sales? And how do you know which homes and which sales data is actually relevant to your own home search, with its unique specs?
Here’s our expert-sourced guide on how to calculate price per square foot in the most meaningful way possible — with tips on how to choose comparable listings, and where you can find accurate sales data for your own area.
What is a square foot?
A square foot is a measure of the area of a space. Think way back to your early math classes when you had to look at a square and calculate how much space was inside the square. To do this, you multiply the length times the width, and voila! Square footage.
In homes, calculating square footage can be as simple as multiplying the length times the width in square or rectangular rooms. But things get a little more complex when calculating the square footage of a room with an irregular shape. The easiest way is to draw a diagram of the space and then break it into easier-to-measure squares and rectangles.
Calculating your home’s square footage can cause major flashbacks to geometry class, but it’s worth it to ensure you’re getting an accurate measurement. Kyle Whissel, a San Diego agent whose team has over 1,200 single-family home transactions, recommends that your agent compare your home’s square footage to tax records and previous MLS listings if the home has been sold before.
You can also hire an appraiser to do the calculations for you. This will give you the most information and allow you to address any discrepancies such as an unpermitted addition or previous inaccurate measurements.
Common calculation errors
One thing to be wary of while you’re looking at price per square foot is calculation errors, which can occur for a variety of reasons.
Whissel warns against estimating the square footage. Instead, his agency uses the detailed MLS form to “go to the house and physically fill out the sheet, which includes measuring all of the bedrooms” as well as the rest of the house as opposed to agents who “just look at the last time it was on the MLS and just copy everything. They don’t actually take the time to personally walk the house and document everything.” This is one big reason calculation errors occur.
Other calculation errors occur when the square footage of one floor is simply multiplied by the number of floors. In a two-story home, for instance, there may be areas that are finished on one floor but unfinished on another, or the second story may only be a partial story.
What’s included in a home’s square footage?
Square footage refers to the gross living area (GLA) of a home, typically the space that is finished, above grade living-space in a residential property. Basements — even finished basements — aren’t usually counted toward square footage, but there are some potential exceptions such as a walk-out basement, or those that aren’t entirely below grade. Plus, local practices can differ. Attics and spaces disconnected from the main living space don’t count toward the home’s GLA, either. Another good rule of thumb is to include areas that are cooled or heated with a conventional system. This means that any porch or patio space isn’t included in the square footage.
It’s also important to note that there’s a difference between GLA and total living area (TLA), which will usually include a finished basement or additional detached living space.
How to calculate price per square foot
First, here’s the formula for calculating price per square foot at the most basic level: Take the home’s price and divide it by the home’s square footage. The price per square foot tends to be higher for smaller houses, and lower for larger houses. Let’s look at some examples of how that works:
- House 1: A 1,500-square-foot home is listed for $300,000. The price per square foot is $200.
- House 2: A smaller, 1,200-square-foot home nearby is also listed for $300,000. The price per square foot of this home at the same listing price is $250.
- House 3: A larger, 2,500-square-foot home is listed for $350,000. The price per square foot is $140, substantially less than the price of both smaller homes by this metric.
Keep in mind that this calculation alone doesn’t give you any details about things like a home’s layout or its amenities and features. For a more contextualized and therefore useful calculation, think of it this way: “You can get a good value range per square foot with the basic calculation, but then you need to adjust for improvements,” says Zach Harris, a top-selling agent in Southern California.
“You have to add things such as a pool, landscaping, views, lot size. There are other factors besides just the price per square foot of the home that you have to take into consideration.”
He does note, however, that a buyer might be able to use these nuances to boost their negotiating position: “It can certainly help you if there is a home with an inferior view at a lower price per square foot. You might want to take that as a comp to show the seller, and it might help you out.”
In other words, being educated about price per square foot can help with leverage… even though there are additional factors that go into a home’s value.
How to calculate the average price per square foot for multiple homes
Finding the average price per square foot for multiple homes helps you come up with a contextualized range from a larger set of data. To do this, find the square footage of each home and then divide it by the number of homes. Using the above examples, it would look like this:
$200/square foot (House 1) + $250/square foot (House 2) + $140/square foot (House 3) = $590/square foot
$590 / 3 (number of houses) = $196.66 (average price per square foot)
So in round numbers, $200 per square foot is the average range in this sample set. But keep in mind that the price per square foot will differ between houses for a number of reasons. Whissel explained that things like whether the square footage is extra rooms or simply larger rooms can make a difference in price per square foot. Other factors include lot size, a pool, extra buildings like sheds, and interior finishes.
How do you know which homes to compare?
Of course, to get the most useful data, you need to know how to choose which homes to compare to your subject home. These are also called “comparable listings” — or just “comps.”
You’ll want to look for comps that sold recently, ideally within the last three to six months. You’ll also want to make sure your comps are located near the subject property — the closer, the better. Plus, your comps should be about the same age as your subject property.
Beyond that, comps should have similar attributes to your subject property — for instance, if the property you have in mind has a pool, so should the comps if possible.
And your comps should have similar square footage to your subject property as well.
“For comps, I usually go within 100 square foot of the subject property. So if the subject property is 1,500 square feet, we’d go down to 1,400 and go up to 1,600,” Harris explains. And he takes a similar approach for the age of the home. “Say it’s 1995 — we’d give a 10-year age range, down to 1985 and up to 2005.”
From there, “you have to really narrow those down, see which ones are the closest to your subject property, and then go in and look at improvements compared to your property, such as view or lot size,” Harris explains.
Where do you find the data you need?
You’re going to need data to do all these calculations, of course. So where do you get the sales price and square footage intel you need to calculate price per square foot?
Some online sources are more reliable than others. So if you use those, you want to make sure these sales actually closed before using the price per square foot data in your own home search.
Public records data is not always immediately accessible — but it can be one of the most reliable sources of data for buyers, and should include recorded real estate sales. Find repositories of public records data online here.
Some local multiple listing services — or MLSs — will provide data to the public; check with yours to find out.
Real estate brokerages sometimes will print or mail information about homes that sold recently. You might go to local offices to check for such info.
Harris suggests that you could also call a title rep and get a property report sent to you — usually free of charge — and give you some data to start with.
But in an ideal situation, you’ll want to connect with an in-the-flesh real estate agent: A good agent can help you find comps and calculate price per square foot data if that’s an important part of your home search.
“The best resource is always going to be going directly to a real estate agent who has MLS data and can get you all the comparable properties,” Harris says. “Not only the sold ones but the active, the pending, the sold, the expired.”
He notes that expired listings tell you what people weren’t willing to pay — and that can be useful — but the sold comps are always the best and most accurate for deriving price per square foot value.
“So I’d say your No. 1 source would be a real estate agent,” Harris says.
And ideally, that person would be local to your specific area. “Local agents know the local areas better than an out-of-area agent, who might be taking the city on a whole, where local agents know that certain neighborhoods bring more or bring less value. So it’s good to have somebody local that knows the neighborhoods intimately.”
The dangers of relying on price per square foot in your home search
While price per square foot can be a useful metric to compare homes while you’re house hunting, it can also be misleading. Because GLA doesn’t include things like a finished basement, a wraparound porch, other detached buildings (even finished ones), or a stunning view, it has the potential to lead you astray in your home search.
Whissel notes that shows like Million Dollar Listing can create an unbalanced reliance on price per square foot. “When in reality,” he says, “as agents, we rarely ever use price per square foot. What we do use square footage for is to find comparable homes that are of similar square footage. But we don’t look at a home that’s 1,500 square feet and say, well this one’s sold at 400 a foot and that one’s 1,600 square feet, so I just multiply 400 times 1,600.” A buyer wouldn’t necessarily be paying an extra $40,000 for an extra 100 square feet.
What Whissel does is look at the home more like an appraiser would. So, in the above example, if the extra 100 square feet was an extra room, that would be worth more than if each room was just a little bigger “because an extra bedroom is worth far more than every room being slightly larger to make up that extra hundred square feet.” Other factors that account for price per square foot differences are things like a view, amenities like a pool or sauna, and porches and patios.
Over reliance on price per square foot can blind you to other factors that one house might have that another doesn’t.
Should I use price per square foot in my super-duper specific home search?
The answer is yes and no. Price per square foot can serve as a good metric when comparing homes or deciding whether you’ve found a good deal. But simply discounting a property because it seems like it’s higher than the average in an area can mean you’re ignoring features and amenities unique to that specific property.
Price per square foot should be just another tool in your home search toolbelt. Because the more you know and the better educated you are, the better you’ll feel about the home you eventually purchase. Having a trusted agent by your side will help you understand the nuances of using price per square foot in your home search.
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