INSIDE REAL ESTATE: Taking the mystery out of price per square foot
A couple of years ago, the Alaska Multiple Listing Service inserted a field in its standard listing form identifying the price per square foot for every residential listing both new and pre-owned.
As a result, virtually all buyers begin their search by asking “What is the square footage price of the home?” Unfortunately, price per square foot is not a very accurate way to evaluate a potential home purchase.
And it is particularly problematic when it comes to evaluating a potential new home to be built.
As an example, let’s compare some of the differences in cost between a brand new 2,000-square foot homes by competing builders. First, lets look at location. What is the difference in value and cost between a 6,000-square foot lot and an acre home site? How about well and septic systems on that acre lot versus public water and sewer that is already calculated in the price of the lot?
Then, lets look at topography and soils conditions. Does the lot need gravel import and if so, how much? Will the septic system be for a three-bedroom home with a den or a four bedroom? What about the length of the driveway?
The minimum driveway setback in Anchorage is 20 feet but a pie-shape lot requires the home to be set back farther, which adds cost for fill and asphalt. Some decks are only 4x8 but even a small deck requires hand rails if it is more than 30 inches off the ground.
A larger deck plus stairs and handrails can add more than $10,000 to the cost of a new home without adding square footage. Some garages are only 20 x 20 and are not even large enough to fit a full size pick-up. Others may be 22x 24 but both are classified as a double car garage in MLS.
Landscaping in Alaska is expensive. Some new home communities are required by their Municipality of Anchorage approval to top soil and hydro seed the entire lot. Others have specific requirements such as the type and height of trees and shrubs.
Obviously, landscaping required by the builder adds to the quoted square footage cost of the home. Leaving it up to the first homeowner to put in reduces the cost per square footage but adds to the buyer’s out of pocket expense after the sale.
Requirements for lap siding on all four sides rather than just the front of the dwelling also increases the quoted cost per square foot.
Builders have different strategies when it comes to quoting a square footage price. Allowances for appliances, lighting, cabinets, flooring, etc., may be lower to initially attract buyers, but by the time all the selections are made the price per square foot may be as high or higher than the competitor.
Two-story elements, whether in the foyer or great room, add to the cost of the home without adding to the square footage. All that’s missing in a two-story element is a floor. Ceiling height is another hidden cost. Most new homes now have nine-foot ceilings in the main living level.
However, eight-foot ceilings on the second floor and basements are still standard. Count the number of windows included in any plan and you can increase or decrease the cost by $300 to $500 per window depending on their size.
We’re probably never going to change the question “What’s the price per square foot?” for either resale or new homes.
What buyers and real estate professionals need to do is take the time to understand the differences of each individual property before a final home buying decision is made.