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When comparing Boise homes for sale, is cost per square foot an effective tool? Main Idaho Real Estate Insights
A frequent topic of debate and though it can be a simple measurement it only works if you are comparing apples to apples.

http://www.pre.nl/image/WeigtingApplesAndOranges.jpgHow can you compare two different things. Let's start with some extreme examples and then work our way back to reality. What is the cost per # of a Ford Taurus to a Jaguar XL? What about a Dodge Truck compared to a Ford? They are different products with different features and benefits but you would not buy based on cost per pound?

Homes are the same way. First, lets level the playing field to understand why it can be difficult to compare cost per square foot of a home.

  • Lot size
  • floor plans
  • upgrades (ie granite)
  • location
  • communitiy amenities
  • benefits of the home (ie pressurized irrigation)
  • features of the home (fence around home (type, heighth) and landscaping (mature, how extensive)
  • unseen differences like energy efficiences from insulation or quality seals in doors to windows and energy efficient HVAC.
  • Age of home. Note- most new homes have warranties.
  • and more

That is not to say that it is not something to measure but it has to be in context. For example if one home has 1,500 ft2 between a family room,  a bonus room and formal living room and the other home has the same square footage between a family room and bonus room, cost per square foot is dissimiliar. It really only works if you compare models of  very similiar homes on very similiar sized lots. If two home are so similiar, it could be a basis to make a decision or possible leverage to negotiate price for the one you prefer, especially in today'smarket.

Builders may talk about price per square foot if their competitive edge is efficiencies where they can provide more per square foot in the price like Hubble and CBH position themselves. Most builders are trying to separate their homes from the competitiion so it is difficult to compare.

The real measure is value to you! Sometimes it may be the least cost per square foot but make sure you are not losing $ somewhere else, like monthly energy bills becasue the home is poorly insulated, has leaky windows? Also, if there is a big discrepency what does that tell you? Really, what does that tell? If the homes are so similiar it may tell you the seller is more motivated but maybe not?

Trey Langford
Founder, Building Credibility.com

Boise Real Estate Cost per Square Foot, Boise Homes for Sale, Boise Home Buidlers

 
Posted by tlangford at 7/30/2008 3:22:00 PM
Comments (6)
Re:When comparing Boise homes for sale, is cost per square foot an effective tool?
Trey- It would be great to get an appraiser to post on this. I think they have a pretty object approach.
Posted by on 7/30/2008 10:55 AM
Re:When comparing Boise homes for sale, is cost per square foot an effective tool?
I don't think an appraiser can give a simple answer. I'm sure you've read an appraisal before..... just how many words can you use to get to the point? I'm sure a few of my appraiser friends will not see much humor in that comment. Sorry guys & gals, but reading an appraisal is like reading War & Peace, over and over and over.

I think cost / sf is a good first cut and then if the propert is not totally out of reality with surrounding properties, then further evaluation is warranted.

The same is true with commercial properties; we run several different analyes (ratios) on a property and then when taken together you can develop a feel for the property. Using any one ratio to make a decision on is rather foolish.
Posted by on 7/30/2008 6:18 PM
Re:When comparing Boise homes for sale, is cost per square foot an effective tool?
Trey,

I've been following your buildingcredibility website for over 2 years and find
many aspects of the website informative and insightful. However, the columns you personally write
are often rife with spelling and grammatical errors. It's obvious that
you are a intelligent man and well informed about real estate, but
your misuse of English detracts greatly from the effectiveness of your columns! To be the website's founder and principal
columnist, and to so poorly adhere to the rules of good English is
unforgivable! Please clean up your spelling and grammar and your readers will greatly appreciate it!l
Posted by on 7/30/2008 10:18 PM
Re:When comparing Boise homes for sale, is cost per square foot an effective tool?
Thanks for calling me out. I actually am a great speller. I will slow down, that is normally the problem My Dad would kill me if he read a post with spelling errors.
Posted by tlangford on 7/30/2008 10:41 PM
Re:When comparing Boise homes for sale, is cost per square foot an effective tool?
I believe that the cost per square foot measure is more a tool for the retail consumer. Most home buyers are not knowledgeable in determining a cost/value, so the builder must provide an artificial measuring stick. From builder to builder there may , in fact, be a correlation on CPSF to Value. I would suggest that, while difficult to quantify, the more important metric would be Value per Square Foot (VPSF). Cost per square foot is, in large measure, influenced by the lot cost...so in the overheated market of late 2006
would it be fair to say that when lot prices were doubling the cost per square foot should have gone from $130 psf to $155 psf. My point is that VPSF (amenities-lot-finish-location etc.) is far more indicative of the ''measuring'' stick that should be used.
Posted by on 7/31/2008 1:54 PM
Re:When comparing Boise homes for sale, is cost per square foot an effective tool?
I love the concept posted yesterday about Value Per Square Foot (VPSF) except the problem is we could never get everyone to agree on the exact formula. I have said for years we need to go beyond sq. ft. for the dollar and at least graduate to cubic ft since the cost to build a home with vaulted ceilings or 9-10' ceilings exceeds the costs of 8' even though the home has the same number of sq. ft.!

SF, CF, and VPSF all are factors; however keep in mind that a I just researched a single builder that builds somes from 1,000 s.f. to over 4,000 so the materials and workmanship will be similar just not the size. The average price per square foot of four homes closed this year which were all 1400 sq. ft. homes in Meridian averaged $116 a sq. ft. However, if you took that plan and added not only 1400 sq. ft. over the original area and another 400 sq. ft over the garage you end up with a home that is 3200 sq. ft with the same footprint and the exact same amount of roofing. That same builder 3 homes so far this year in South Boise that were between 3145 and 3173 sq. ft. for an average of only $58 a sq. ft.!

What if you bought their base model at $58 a sq. ft. and added in slab granite, travertine tile, gold plated fixtures, added a pool in the back yard, etc., you could never sell such an overbuilt home in the same community and get your money back even though the cost per sq. ft. would still be under $100 a foot.

There is a definate reason the butcher sells parts of the same cow as Prime Rib at $7.99 a pound, Petite Sirloins for $3.99 and hamburger at $1.99 and sells the bones to pet owners for $0.49! Don't try to justify the same price per pound (sq. ft.) claiming it is Black Angus, etc.

If you are still not convinced: Do you buy your lingerie by the square yard at Victoria Secret?; Do you buy your car by the pound?; Do you price all Scotch by the fluid ounce?; Did you buy your jewelry buy the pound based on current price of gold?; Do you pay your dentist by the hour to pull your impacted wisdom teeth?; etc.

If you still are not convinced, I will make you a great deal on a 1978 Fleetwood mobile home!

Jim Paulson, CRS, GRI, EPRO
Broker/Owner - Progressive Realty Corporation
www.Progressive-Realty.info
Posted by on 8/2/2008 2:12 AM

Michelle Penick, Build Idaho Client Real Estate Services

Michelle Penick

Idaho REALTOR ®
208.629.0217 | Michelle@FullSailBoise.com
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