The square footage of a house … how important is it when you are buying or selling a home?
When it comes to listing homes in the Multiple Listing Service (or MLS) it is important to get the square footage right.
A home’s size will often dictate the function of a home for potential home buyers. For example, a 3000 sq foot home will offer far more than a 1500 sq foot home.
Many home buyers will have minimum square foot requirements when searching for their perfect home. If you inflate the square footage of your home the buyer will be disappointed when they arrive for a showing.
The square footage of a home will also play a major function in a home’s value in conjunction with other criteria. Size is big factor appraisers use in evaluating a home.
First, let’s look at how a homes living area or square footage is calculated in the context of a real estate transaction.
Most real estate transactions are financed with a mortgage. Because of this, we are most concerned with is how an appraiser will determine the square footage of a home. Because the square footage of a house has some correlation to what a home is worth, it is important to understand how an appraiser views the square footage of your home.
One of the largest players in the mortgage market is Fannie Mae and they use the ANSI guidelines for determining the square footage of a home. So what can be included in the square footage of a house for living space?
Simply put, heated, finished, living space above grade, measured by the outside dimension.
So a 24 by 38 colonial 2 floors would be 1824 square feet. Now homes that have sloped roofs are areas above the foundation that is not heated living areas get more complicated. A perfect example would be a cape cod style home where the second floor is under a sloped roof. So technically anything with a sloped roof has to have over half the room with a vertical measurement over 7 feet to the ceiling and nothing can be counted under 5 feet of ceiling height.
So let’s talk about heated space. Sunrooms, converted porches, breezeways, etc… cannot be included if there is no heating source.
Also, anything that is partially or fully below grade cannot be included. You should not include finished basements in square footage, even if it is a walk-out basement.
For more information on how square footage is determined check out this article at www.AppraisalScoop.com
Many buyers or sellers, who are inexperienced in the subtleties of pricing homes, will use the price per square foot to determine the value of a home.
While a home’s square footage will play a large role in the price of a home, it must be used with many other criteria to determine value.
Square footage is only one of several critical criteria to accurately price a home.
Take a cross-section of Tewksbury MA homes for sale. I have taken all the homes between 1600-2400 square feet that have sold in the past 6 months. The price per square foot ranged from a low of $193 per square foot to a high of $305 a square foot.
On an 1800 square foot home that would be $347,000 to a high of $549,000, with a median price of $447,000. The only valuable conclusion you could make on a home is it should probably be priced between $350k to $550k. Which is too much of a range to give any real indication of value.
The problem with only using square footage or the living area of a home to determine a home’s value is that you are not considering multiple other factors.
Age, condition, function, appeal, location, lot size, etc… all are all criteria that need to be factored into the correct pricing of a home.
When buying a home don’t become overly obsessed with the square footage of a house. Concentrate more on function, layout and appeal as concern to you and your family.
There are many things that can make a larger home feel smaller and vice versa. Staircases and hallways can eat up 100’s of square feet of floor space. A homes layout can drastically effect how it feels from a square footage standpoint. Typically homes with less hallways and an open plan will feel larger than a similar home with lots of hallways. Stay open minded about square footage when choosing homes to see.
Now obviously you if you are interested in a 3000 square foot home, obviously a 1600 square foot house will not do the trick. But don’t discount homes that may appeal to you over a few hundred square feet.
Also be very careful of the accuracy of a the square footage of a house that is listed in the MLS. lately many agents will list below grade, basement remodels in a homes living area. You can find a 1200 square foot ranch listed as 2400 square feet. A ranch with a finished basement is not going to function anywhere near a colonial with all 2400 square feet above grade.
I have years of experience in this business and I can tell you there can be many inconsistencies in the listed square footage of a home:
Independently verify the stated square footage of a home. Never assume public records, a listing agent or a seller are giving you the correct square footage.
Also, as I pointed out the size of a home does impact the price. Make sure you are comparing homes that have calculated the square footage in a similar fashion in determining the fair market value of a home.
For a home seller square footage is a little more important as it will be one of the determining factors of the value of a home. Let me stress one!! There are many other factors that go into pricing a home and you should not rely solely on price per square foot.
Generally speaking an appraiser will only be looking at homes with similar function with in 20% of your homes square footage. If you have a 2000 square foot home an appraiser will look at a range between 1600-2400 square feet. To go outside that range they will have a lot of explaining to do. I know you want your home to be worth more money but don’t go adding unheated areas or finished basement to your home square footage.
There is a danger of overstating the square footage of your home. The danger is if you significantly overstate the square footage of your house you will probably be showing your home to the wrong buyer. If you are including a 1000 sq feet of finished basement compared to say a 3000 square foot home that is all above grade the buyers are going to show up and be sorely disappointed.
In summary, we can’t ignore the accurate square footage of a home. It is one of the factors that go into determining a home’s price and will also set a general expectation of buyers viewing a home.
If you are a home buyer don’t get caught up solely in the square footage of a home. Be open-minded and objective. Square footage can definitely be overstated by agents or sellers. Look slightly below what you think is your minimum square footage, especially when there is low inventory and the market is moving quickly. Always verify the accuracy of the stated square footage.
If you are a home seller, be careful not to overstate the square footage of your home or exaggerate any features of your home. There also can be liability issues for overstating the size of your home. It may give a homebuyer reason to initiate a lawsuit if they discover your exaggerated the size after they move in. Highlight the true attributes of your home and don’t try to over-inflate the square footage of your house. Don’t try to make your house into something it is not. That will only backfire on you.
This article, How important is the square footage of a house? was provided by Kevin Vitali of EXIT Group One Real Estate. I have helped 100’s of home buyers and sellers over the years and am confident my experience and skills can make purchasing your next home a pleasant experience. Please feel free to reach me at 978-360-0422 to discuss your upcoming purchase.