Square footage and bank apprasials

jane__nyAugust 9, 2009

I have my house listed almost 2 months. I'm confused about comps vs. price per sq. footage. The way I understand it, houses are listed by price for sq ft. If a house sells for a higher amount, it raises the price per sq. ft. Bank appraisals are based on that price. If an accepted offer is for a higher amount, the bank may not appraise at that amount.

My confusion is, what is the point of a listing price if it is above the current price per sq ft? It appears that you must price your house accordingly or your house won't appraise.

There is a large volume of homes for sale. Sellers are dropping their prices as many are desperate to sell. Those houses are selling but houses in the higher bracket are selling more slowly. The sale of the lower priced homes are dictating the price per sq ft.

The price per sq. ft is based on an average of houses sold. Lower priced houses are selling faster. They are lowering the price per sq. ft. So, it seems it doesn't matter how good your house it, a buyer can only get a mortgage based on appraisal which is based on price per sq. ft.

This seems unfair to me as a seller.


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Price per square foot is used to adjust between comps, not as the sole basis of an appraisal.

It is more like a small adjustment, 10% more square feet could justify a price adjustment (often less than 10%).

It also gives some confidence to an appraisal if the per square foot price is in line with recent sales in the same area.

Commercial work lives and dies by the square foot.

    Bookmark   August 9, 2009 at 10:14AM
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I guess I need Real Estate education. I just don't understand it. If everything is priced per square foot, why aren't houses just priced that way?? No negotiation, as there is no point if the bank only appraises that way.

    Bookmark   August 9, 2009 at 6:37PM
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Not all square footage is created equal. Obviously a 2000 square foot custom built home with 10 foot ceilings, hardwood and stone floors, granite counters, cherry cabinets and high end appliances, etc.is going to cost more than a 2000 square foot tract home with builder grade carpet, vinyl and laminate counters.

    Bookmark   August 9, 2009 at 7:53PM
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The land the home sits on is also a thrown into the equation. A 2000 sq ft home on a 1/4 acre lot will probably appraise for less then a 2000 sq ft home on a wooded acre lot in some instances. Also age of the home has a part in the appraisal process. There are so many variables that a straight square footage price just isn't feasible in a lot of areas.

    Bookmark   August 9, 2009 at 8:35PM
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"If everything is priced per square foot, why aren't houses just priced that way?? No negotiation, as there is no point if the bank only appraises that way."

Have you ever actually read an appraisal?

They are NOT based just on square feet.

    Bookmark   August 10, 2009 at 9:43AM
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If pricing was as simple as $ per sq foot, homes would never increase or decrease in value. There are always homes that set a record for highest selling price in their neighborhood. In fact, my neighbor's house recently did that. I don't know for a fact that the buyer had a bank appraisal but it's pretty likely they would've.

    Bookmark   August 10, 2009 at 1:46PM
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Sq. footage is the starting point. Then they add this and that subtract for this or that etc. # of baths, FP or 2, garage, finished lower level, solid surface counters, tile, hardwood floors, type of construction, plaster walls. Decks porches & views.

    Bookmark   August 11, 2009 at 10:21AM
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An appraisal doesn't set the selling price either. Most banks will only lend up for some percentage of the appraised value. As an example, assume a house appraised at 100k. A particular bank might only lend up to 90k for that house. Lets say the negotiated price is 102k. The buyer would have to come up with 102k-90k = 12k (plus all the fees etc) to complete the purchase.

Of course, many buyers might back out of a deal if the house doesn't appraise for the purchase price.

    Bookmark   August 11, 2009 at 3:21PM
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appraisals also differ by location.

For example, a new home builder could have several subdivisions located all over a large metro area..with some of the subdivisions being maybe 75-100 miles apart. Maybe some of the subdivisions have the exact same model/floorplan with the exact sq footage. Maybe by chance, the homes are the same age and have the same options.

But the same model in town A could appraise for $50k more than the exact model in town B, which are 75 miles apart. Why? Maybe town A has better schools and/or is a more expensive town that has a better location due to proximity to certain things, maybe closer to the mountains or sea or something.

    Bookmark   August 11, 2009 at 3:56PM
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