Thu, May 02, 2024 at 12:10PM


Using price per square foot as a measure for determining the value of a house could be entirely misleading, deceptive and dead wrong even for houses on the same block, built around the same time frame, and to the same building code. This measure is even more deceptive for new homes being built on the same block, to the same building requirements, and to the same neighborhood association restrictions. However this measure continues to be used, abused and one could argue exploited. 

It is not clear how this measure came about.  But, one can see how this measure  can be handy for  banks, tax appraisers, roofers, painters, real estate professionals and others to enable them to commoditize, price and negotiate costs. While this measure has some use in the industry, using it alone could be inaccurate, flawed, distorted, and just dead wrong. We will briefly explain.

Let us use a simple and  very targeted example to point out the fallacy of using this measure.

Let us assume that a buyer is considering  a home in Palm Coast, Florida, on Kingfisher Lane in Ocean Hammock. While some features of a house are relatively obvious to buyers, others are not at all. As an example, what  is the hot water system? Is it electric or gas? Is it with a tank or is it tankless, does it have one or two systems? There is a significant cost difference, therefore value difference, among these alternatives. Two very similar homes both have lanais. One has a much larger lanai than the other. How does that affect the price per square foot?

One way to get somewhat closer to a more accurate value is to try to place a house into one of the following categories.

Budget Category-  This is an entry level house built at the low end of the cost spectrum. If you look at major cost areas such as exterior material, doors and windows,  cabinets, heating and cooling systems, flooring, lighting and plumbing fixtures you would see the least expensive material used with low workmanship. Houses in this category are built relatively fast.

Mid level Category – A house built in this category would be somewhat better than the budget category both in terms of quality of material used and the workmanship. Vast majority of homes fall into this category.

Custom – Custom homes are uniquely designed to fit into a particular home site with a distinct architectural style. Quality of the materials used as well as the the workmanship and amenities are much better than the first two categories. You would expect to see high roof lines with a more intricate design, better exterior material such as  stone and brick, higher level of finished woodworking, better ceiling features,  better cabinetry and  flooring,  granite counter tops and stainless steel appliances.

Luxury Custom – A luxury home is top of the line in material used as well as the workmanship applied . When you walk into this type of home, you  sense the opulence  and jaw dropping quality. These homes are built with the highest grade of construction materials, the best workmanship, and have all the high end features and amenities a luxury custom home buyer should demand.

As a first step to estimate the value of a house, you need to place the house into the right category. The next iteration to get even closer to the value of a house would be  to ask a professional  industry expert ,such as an actual builder,  to help you “ look under the hood”, to study, examine and better determine  the value.

You can use price per square foot to estimate a starting point for the value of a house, but you will need 1) to make sure you compare  “apples to apples”  and  then 2) put in additional effort to establish a fair value.

At Luxury Builders Inc, we build luxury custom homes. Look at the houses we have built, talk to our clients and talk to real estate agents in our area. Carefully study performance features and specifications of the houses we build. We invite you to bring your choice of an industry expert to look at and study our model on 23 Kingfisher Ln, in Palm Coast.

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