Calculating price per square foot is a relatively simple calculation.  However, the importance of price per square foot cannot be understated!  Let's use an example of two homes.  The first home is 1500 square feet, and is listed for $650,000.  Our second home is 2000 square feet, and listed for  $700,000.  You are considering both homes and want to evaluate which one may be a better deal.  Of course we're going to look at a number of things such as: age of the home, lot size the home is on, any updates the house has had, if the home has a pool, the list goes on.  But if you're looking for a great way to compare two homes that have the same relative characteristics, price per square foot calculations should be crucial in your decision making process.

In order to calculate price per square foot you simply divide the homes asking price by the number of square feet.  So in our example we would first take $650,000 and divide by 1500, giving us $433 per square foot.  In our second example we would take $700,000 and divide by 2000 giving us $350 per square foot.  Although the price of example two is higher than example one, example two is a much better value.

Another reason it’s important to look at price per square foot, is because appraisers have to use it in the valuation. Appraisers need to create a “bracket”. That means they need to find sales with price per square foot lower than yours, and sales with price per square foot higher than yours. This is essential in their final determination of a homes value. Whether you’re a Buyer or a Seller, it’s in your best interest to understand price per square foot before you choose to transact.