Hello everyone !
I am finding out a market value for a 2103 sq ft, 1956 house that I want to purchase. It is in a lower income neighborhood. It's hard to find comps, but basically I found a home that was built in the same year, same neighborhood, but is 600 sq ft smaller. That home sold for $137,000. Though it looks decent from the outside, the inside was completely renovated and something that you would find in a higher income neighborhood.
So how should I go about adjusting for the difference in sq. ft? I used a method of finding 2 homes that were sold in the last six months with very similar features, and came up with a $166 per sq ft difference in sold price. Should I do 166 x 600?
Appreciate any insight that you can give!
I would consult with a real estate agent. In some areas properties will trade on a price per square foot basis, but in other areas the square footage may not have much of a difference. In the neighborhood I live in, square footage only has a minor impact on price.
Before you adjust the price for square footage, you mention the finish on the sold home where high end finishes. If your property doesn't have the same finishes, you do not want to use those houses as a comparable.
With that said, if your property does have the same finishes then you do want to add the sum=166x600, to the sale price that the property sold for to calculate the value of your property.
Also you can ask an appraiser if he will give you a verbal value of opinion. Most will discount their fee since they don't have to deal with the paper work, but keep in mind the opinion would not be used by a bank or a buyer for value.
IMO, price/sqft is a really dumb way consider RE, but I guess that's what some books from the gurus are teaching. If one lives in the outback of AU, considering property in the U.S. midlands, then there must something to compare, but it leaves out all consideration for
- curb appeal
- floor plan utility
- a harmonious color scheme
Be careful using price/sq ft. Base on the information you provided and guessing that both houses are evenly matched in terms of finishes, bedrooms, bathrooms, amenities, lot. You would be selling your house for $99,600 more than the comparable house. The neighborhood probably cannot handle that price.
In a lower income area, I would use the last comp of $137,000 as my high baseline. Then if I could match or come close to matching finishes and provide something that the other house did not to include the 600 sq ft. I would probably push the top comp envolope for that area and list 20-30k higher. If the house does not fly off the market, then the market is telling you that you are too high.
You also have to remember that the house has to be able to appraise when you sell it. In lower income area's you will be facing FHA/VA loans most likely.