With real estate, it seems to be all about the price per square foot.
With haute couture , who in their right mind pays more just because more fabric goes into a dress? Set aside quality, workmanship, details and the name of the designer… What does the price tag of a dress have to do with the amount of cloth that went into it? Very little.
Why do we place so much emphasis on the price per square foot of real estate to determine it’s value?
In house hunting this past weekend with buyers, I was struck by the mentality that so many of us have about real estate … buyers, sellers, real estate agents, appraisers. It boils down to price per square foot, and OFTEN it shouldn’t.
We saw 7 breathtakingly beautiful waterfront condos. Our buyers ranked each of the 7 in order of preference… based solely on view, location, finishes, and updates, and quality of workmanship… not taking into consideration price. Which ranked highest? They preferred one of the lowest priced units. Not one of the other condo units even came close. Question was: Was it worth the price-tag it was listed at? Or should they base they offering price at what other units had sold for recently (per square foot)? This one condo had more value to these buyers, than any of the other units, and was priced almost at the bottom. We ran comps … up one side and down the other. Nothing had sold recently in Deering Bay to even remotely support the list price. Deering Bay closed sales were all coming in well below the $1 million mark, and only a handful of closed condo sales in the past year.
Every single recent, relevant “comparable” sold well below the asking price per square foot of this one. And this one was one of the lowest priced 3 bedroom units listed for sale in Deering Bay. It was the one they wanted. Priced several hundred thousand dollars below their second and third choice options, that alone made it worth at least close to asking price (considering that if they lost out on this one, there would be a sizeable price jump in order for them to buy option number two). The comparable recent sales painted a bleak picture. Every single recent comparable sale indicated that the sales price on THIS one should be well below it’s asking price. No buyer wants to overpay. But because these buyers recognized value, they submitted an offer, considerably above the ‘suggested’ price per square foot (based on recent sales). Let me mention too that we knew there was another interested party. We were competing against another bid. The other buyer submitted a stronger offer … that same day… and the seller accepted the other offer.
If we shopped for homes the same way we shop for dresses, we’d buy the most beautiful one we could find for the price we could afford, without thinking in terms of how much square footage (ie. fabric!) was involved.
Similarly sized units are currently listed between $1 million and $1.6 million in Deering Bay. The lowest priced unit, listed for just under $1 million dollars needs a boatload of updates. The other available condos in Deering are listed for $1.3 upward with varying finishes and views…
While there’s a certain degree of validity in calculating the price per square foot on recent sales and using that as a basis for buying property, I think sometimes we need to re-evaluate how we value property. The Miami real estate market is heating up. When you are competing against other buyers, you may miss out on your first choice if you get mired in, calculating your offer price based on average or median price of SOLD comps. If you are buying an average property, by all means, calculate based on recent ‘comps’. And if you are relying on financing and an appraisal, that will certainly factor in. We are programmed to buy property based primarily on price per square foot. We are dead set on buying real estate, across the board, that way. That’s fine when we are buying a cookie cutter home, identical in every way to the one next door. But with luxury property, and Miami waterfront condos there is a whole lot more to consider when placing a monetary value on real estate. More and more buyers in this changing South Florida real estate climate are having to move on to option number two (which they like less… and ultimately costs them more) because they get caught up in the average price per square foot of “comparable” sales .
Value often has little to do with the amount of yardage in a dress, or number of square feet in a house. If you would like to buy or sell property, especially in South Florida, and are looking for an experienced real estate agent to help you find the ideal property, at the best terms for you , please call us at 305 793-1365 or just drop us a note here. The Restivo Team – Miami luxury real estate experts. Call us anytime.