Price per square foot can tend to sound like broker jargon, but in reality, it’s an important figure to pay attention to as both a buyer and a seller. Let’s break it down.

What is price per square foot?

It’s, quite literally, the price of one square foot in a given property. This number is calculated by dividing the listing or sales price by a property’s total number of square feet. 

Why is it important?

The price per square foot is a different way of looking at a property’s cost. Let’s say, for example, you’re looking at two townhouses in the same neighborhood that are priced similarly. Calculating the price per square foot may tell you which one is the better value. It might also be a good jumping off point to ask your broker why one of the homes has a higher or lower price per square foot. Does the one with the lower number have some hidden renovation costs? Is the one with the higher number actually overpriced? Your agent can also provide comparison data on the neighborhood’s average price per square foot, which could give you some good leveraging power when negotiating an offer. 

When is price per square foot not relevant?

If you’re looking at properties in two different neighborhoods, price per square foot is not a good comparison point, as many factors such as school district, nearby parks, and proximity to public transportation influence this figure. However, comparing a home against its neighborhood’s price per square foot is still a good idea. 

If you’re looking at two different types of properties, such as a townhouse and an apartment condo, price per square foot is also not the best way to gauge value. Condo buildings tend to offer amenities and have higher HOA fees, which can all skew the price per square foot. 

In summation, price per square foot is a powerful tool but best used when comparing apples to apples.