If you’ve ever looked at the housing market (we’re guessing that you have) and perused properties available for rent or purchase, then you know that not all homes are created equal. Even so, the value of the home is more than just what meets the eye. When comparing properties, it’s important to gain and record an accurate measurement of the value of the property in order to make the best decision. In this article, we’ll break down four ways to compare different properties side by side.
Price Per Square Foot
This number is, unlike other terms in real estate, exactly what it sounds like. The price per square foot is the number derived from dividing the cost of acquisition by the number of square feet in the property. In calculating the value per square foot, one receives a number which can be compared across properties of varying area and design. The price per square foot is a raw number that outlines the value of the property without needing to account for disparities in size or shape.
Having an appraisal conducted by a professional appraiser is an integral part of the home buying process. The appraisal serves as the official valuation of a home or property based on the opinion of an expert. The appraisal value is most often lower than the listing price, but this number can be used as a means of determining the baseline value of the property, important for both rental and/or resale. The appraiser will take both the condition of the home as well as market information into consideration.
Median Home Value
Think you know what your target home is worth? Think you know what it should be listing for? It’s important to factor in the median home value for the area to get a sense of why the property is priced where it is. The median home value can provide a detailed picture of which houses are worth more than others and where to expect the price on your target property to fall. It’ll also give you knowledge on how to negotiate your own price relative to the values of surrounding properties.
When purchasing a property of any kind (though this is especially important for homes), it’s important to see what’s recently sold nearby. Checking out recently sold homes in your target area (~0.1-0.25 mile radius in the city, 0.5-1 mile radius in the suburbs, more in rural areas) provides an intimate picture of how the market is reacting in your designated area, as well as how homes are performing from start to finish. For our purposes, we’ll define “recently sold” as anything closed and settled on in the last 180 days. Viewing this data can give you a real edge in pricing, negotiating, and knowing the value of your investment.