How to Calculate Price Per Square Foot for Your Super-Duper Specific Home Search

What’s included in a home’s square footage?

Square footage refers to the gross living area (GLA) of a home, typically the space that is finished, above-grade living space in a residential property. Basements — even finished basements — aren’t usually counted toward square footage, but there are some potential exceptions, such as a walk-out basement or those that aren’t entirely below grade. Plus, local practices can differ. Attics and spaces disconnected from the main living space don’t count toward the home’s GLA, either. Another good rule of thumb is to include areas that are cooled or heated with a conventional system. This means that any porch or patio space isn’t included in the square footage.

It’s also important to note that there’s a difference between GLA and total living area (TLA), which will usually include a finished basement or additional detached living space.

How to calculate price per square foot

First, here’s the formula for calculating price per square foot at the most basic level: Take the home’s price and divide it by the home’s square footage. The price per square foot tends to be higher for smaller houses and lower for larger houses. Let’s look at some examples of how that works:

• House 1: A 1,500-square-foot home is listed for $300,000. The price per square foot is $200.
• House 2: A smaller, 1,200-square-foot home nearby is also listed for $300,000. The price per square foot of this home at the same listing price is $250.
• House 3: A larger, 2,500-square-foot home is listed for $350,000. The price per square foot is $140, substantially less than the price of both smaller homes by this metric.

Keep in mind that this calculation alone doesn’t give you any details about things like a home’s layout or its amenities and features. For a more contextualized and helpful calculation, think of it this way: “You can get a good value range per square foot with the basic calculation, but then you need to adjust for improvements,” says Zach Harris, a top-selling agent in Southern California.

You have to add things such as a pool, landscaping, views, lot size. There are other factors besides just the price per square foot of the home that you have to take into consideration.

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  Zach Harris Real Estate Agent

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  Zach Harris Real Estate Agent at Harcourts Prime Properties

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  • Years of Experience 20
  • Transactions 549
  • Average Price Point $205k
  • Single Family Homes 533

He does note, however, that a buyer might be able to use these nuances to boost their negotiating position: “It can certainly help you if there is a home with an inferior view at a lower price per square foot. You might want to take that as a comp to show the seller, and it might help you out.”

In other words, being educated about price per square foot can help with leverage even though there are additional factors that go into a home’s value.

How to calculate the average price per square foot for multiple homes

Finding the average price per square foot for multiple homes helps you come up with a contextualized range from a larger set of data. To do this, find the square footage of each home and then divide it by the number of homes. Using the above examples, it would look like this:

So, in round numbers, $200 per square foot is the average range in this sample set. But keep in mind that the price per square foot will differ between houses for a number of reasons. Whissel explained that things like whether the square footage is extra rooms or simply larger rooms can make a difference in price per square foot. Other factors include lot size, a pool, extra buildings like sheds, and interior finishes.

How do you know which homes to compare?

Of course, to get the most useful data, you need to know how to choose which homes to compare to your subject home. These are also called “comparable listings” — or just “comps.”

You’ll want to look for comps that sold recently, ideally within the last three to six months. You’ll also want to make sure your comps are located near the subject property — the closer, the better. Plus, your comps should be about the same age as your subject property.

Beyond that, comps should have similar attributes to your subject property — for instance, if the property you have in mind has a pool, so should the comps, if possible.

And your comps should have similar square footage to your subject property.

“For comps, I usually go within 100 square feet of the subject property. So if the subject property is 1,500 square feet, we’d go down to 1,400 and go up to 1,600,” Harris explains. He also takes a similar approach to the age of the home. “Say it’s 1995 — we’d give a 10-year age range, down to 1985 and up to 2005.”

From there, “you have to really narrow those down, see which ones are the closest to your subject property, and then go in and look at improvements compared to your property, such as view or lot size,” Harris explains.

Where do you find the data you need?

You’re going to need data to do all these calculations, of course. So where do you get the sales price and square footage intel you need to calculate price per square foot?

Some online sources are more reliable than others. If you use those, you should make sure these sales actually closed before using the price per square foot data in your own home search.

Public records data is not always immediately accessible — but it can be one of the most reliable sources of data for buyers and should include recorded real estate sales. Find repositories of public records data online here.

Some local multiple listing services — or MLSs — will provide data to the public; check with yours to find out.

Real estate brokerages sometimes print or mail information about homes that sold recently. You might go to local offices to check for such info.

Harris suggests that you could also call a title rep and get a property report sent to you — usually free of charge — and give you some data to start with.

But in an ideal situation, you’ll want to connect with an in-the-flesh real estate agent: A good agent can help you find comps and calculate price per square foot data if that’s an important part of your home search.

“The best resource is always going to be going directly to a real estate agent who has MLS data and can get you all the comparable properties,” Harris says. “Not only the sold ones but the active, the pending, the sold, the expired.”

He notes that expired listings tell you what people weren’t willing to pay — and that can be useful — but the sold comps are always the best and most accurate for deriving price per square foot value.

“So I’d say your No. 1 source would be a real estate agent,” Harris says.

Ideally, that person would be local to your specific area. “Local agents know the local areas better than an out-of-area agent, who might be taking the city on as a whole, whereas local agents know that certain neighborhoods bring more or bring less value. So it’s good to have somebody local that knows the neighborhoods intimately.”

The dangers of relying on price per square foot in your home search

While price per square foot can be a useful metric to compare homes while you’re house hunting, it can also be misleading. Because GLA doesn’t include things like a finished basement, a wraparound porch, other detached buildings (even finished ones), or a stunning view, it has the potential to lead you astray in your home search.

Whissel notes that shows like Million Dollar Listing can create an unbalanced reliance on price per square foot. “When in reality,” he says, “as agents, we rarely ever use price per square foot. What we do use square footage for is to find comparable homes that are of similar square footage. But we don’t look at a home that’s 1,500 square feet and say, well, this one’s sold at 400 a foot, and that one’s 1,600 square feet, so I just multiply 400 times 1,600.” A buyer wouldn’t necessarily be paying an extra $40,000 for an extra 100 square feet.

What Whissel does is look at the home more like an appraiser would. So, in the above example, if the extra 100 square feet was an extra room, that would be worth more than if each room was just a little bigger “because an extra bedroom is worth far more than every room being slightly larger to make up that extra hundred square feet.” Other factors that account for price per square foot differences are things like a view, amenities like a pool or sauna, and porches and patios.

Over-reliance on price per square foot can blind you to other factors that one house might have that another doesn’t.

Should I use price per square foot in my super-duper-specific home search?

The answer is yes and no. Price per square foot can serve as a good metric when comparing homes or deciding whether you’ve found a good deal. But simply discounting a property because it seems like it’s higher than the average in an area can mean you’re ignoring features and amenities unique to that specific property.

Price per square foot should be just another tool in your home search toolbelt. Because the more you know and the better educated you are, the better you’ll feel about the home you eventually purchase. Having a trusted agent by your side will help you understand the nuances of using price per square foot in your home search.

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