If you are looking to buy or sell a home in the Richmond, Virginia area, the one thing you definitely want to know is – What is this house really worth? For many people, calculating a price/Square Foot seems to be the easiest (and, in their opinion, the most accurate)!
So, first of all, just what is Price/SF? How is it calculated? It is a relatively simple thing to calculate – you just take the square footage of the house and divide it by the sales price. But is this what your house is truly worth? Is it the real value of the house you want to buy?
Remember, pricing a home is key to making sure that, as a seller, you are getting the right price, and as a buyer, you are not overpaying for the house you are going to buy! For the sellers, if you price it too high, you may eliminate some buyers who would otherwise be interested in your home; and if you price it too low, you may be leaving money on the table! For the buyers, if you have been looking at houses for some time, and a house is price too high, you definitely may have eliminated the house in your mind without ever setting foot in it; and if it is priced too low, you may be wondering what is wrong with it and you may end up seeing how great a deal you can get!
One other way people use to get the value for a home is to look at sites like Zillow and look at the Zestimate! How is the Zestimate calculated? Zillow may estimate the value by coming up with the price/square foot of nearby houses to get a neighborhood/area average, then they will apply this average to the subject home!
Looking at the price/square foot may be useful in calculating the value of a home IF AND ONLY IF all things are equal – which, of course, they generally aren’t. It may also be useful for looking at trends! But that trend is only useful so far – if you have 5 houses that recently sold and the price/square foot of those homes that sold ranged from $100/SF to a high of $125/SF – which is the correct one to use for your home? Most buyers will want to pay closer to the $100/SF and most sellers will want to sell closer to $125/SF! And if the neighborhood average is $115/SF, you may get a buyer who thinks they paid too much, and a seller who thinks they sold too low!
When valuing a home, there are what I call the 9 factors to consider:
LOCATION OF THE HOME IN THE NEIGHBORHOOD!
A home that is located on a cul-de-sac deep within the neighborhood will generally command a higher price than the home that is on the corner at the entrance to the neighborhood, backing up to a busy street!
MAINTENANCE OF THE HOME!
If the home was built in the 1980’s, a home that was recently updated to 2023 standards will generally command a higher price than the home that still have 1980’s finishes! If a home has a new roof, new HVAC system, updated appliances, etc. – it will generally command a higher price than the home where the roof is near the end of it’s useful life and the HVAC system needs to be replaced within the next few years!
If 2 homes in the same neighborhood both have 1/2 acre lots, but one is very treed with little useable green space, while the other home has more green space and fenced in yard – the home with the green space and fenced in yard will generally command a higher price!
HOW ACCURATE IS THE SQUARE FOOTAGE NUMBER YOU ARE USING!
There are many different sources for getting the actual square footage of the house. The tax records in our area can many times be very inaccurate, while the square footage shown in an appraisal may be more accurate because an appraiser has actually gone out to the house and measured it and accounted for things like two story foyers, etc. And then you can have a homeowner who may come up with the square footage themselves by walking the perimeter of the house or adding together the sizes of the individual rooms! A difference of 100 SF on a house with a price/SF average of $120 can mean a difference in the value of $12,000!
WHAT AMENITIES DOES THE HOUSE HAVE!
A home may have an inground pool or even an above ground pool! The house may have terraced gardens! The house may have a screened porch or extensive hardscaping with patios and a fire pit! The house may have a media room! All of these will impact the pricing of a home and may or may not be reflected in the price/SF.
HOW FUNCTIONAL IS THE HOUSE!
If the house is a 2,000 SF ranch in a neighborhood with 2,000 SF two story homes, the ranch may lose some value because of it’s functionality! Likewise, if the garage in the house was converted to living space, such as a rec room, while all the other homes have garages, this may also impact the home’s value!
WHAT COMPS ARE YOU USING!
The real estate market is constantly changing. Homes sold in the last 6 to 12 months represent the past (and in our market, may represent a time when the market was very very hot before it began to slightly shift), while houses that are under contract or recently closed are a better indication of the current market, and homes that are active on the market represent the future! If the comps you are using happened within the last 6 to 12 months to come up with the price/SF, you may be getting a very inaccurate value for the house!
WHAT WAS THE MOTIVATION OF BUYER & SELLER!
Whenever a house is listed for sale, the seller has motivation to sell! But that motivation could be different from seller to seller – a seller who is selling because they are relocating for a job may be more motivated to get a quick sale, while another seller may be able to take their time in selling because they haven’t yet found another home they want to purchase! Likewise a buyer who needs to move into a home quickly because their kids will be starting school soon may be more motivated than the buyer who is in a rental that the lease does not expire for another 6 months! The motivations of both the buyer and seller in any transaction will have a huge impact on the price that is ultimately paid for the house!
OLDER HOMES IN THE CITY OF RICHMOND!
The older homes in the City of Richmond that you will find in areas like The Fan, Manchester, Church Hill, Northside, etc – these homes will be especially hard to use a price/SF to come up with a value! These homes could be renovated or restored, which will impact value! Were these renovations or restorations done with proper permits? Room sizes will impact value – a trunk room in a Fan home may be able to be called a “bedroom” but can a bed really fit into it! Is it truly historic? Does it have air conditioning? Does the basement take on water during heavy rains? Does the house have a slate roof vs a composition shingle roof? Does the home have off street parking? Which block is the house on?
As you can see, using a price/SF to value a home can be a highly inaccurate way to come up with a price! There are better ways to value your home – and getting a detailed valuation from a Realtor who takes the time to look at things like the condition of the comps, the location of your home vs the location of the comps, uses the most similar comps, knows the area, etc. will be the best way to get an accurate value for your home! Estimating the value of a home is just much more complicated! The size of a home is just one important facet to proper pricing! Beware of Realtors who give you a value for your home based simply on the price/SF. You want a Realtor who will consider everything in your home, not just the size!
If you would like a valuation of your home in the Richmond Virginia, whether buying, selling or both, feel free to give me a call and we can schedule an appointment! Remember – no obligation, no pressure!