With more and more home buyers and sellers participating in the home buying & selling process to a greater degree than ever before, we can’t write enough posts that provide the basic infomation and skills that help them evaluate home prices. The other day I talked about the popularity and pricing of homes in differering age segments.
Today I’m going to talk about “the comps” and median price per square foot of homes of differing styles. For this purpose I’m going to use Bellevue, Kirkland and Redmond vs. Seattle or all of King County. We will be looking at the differences in price per square foot for ramblers, split-entry homes and ramblers with basements, tri-levels and two story homes both with and without basements. I’m using all sales from 1/01/07 to date, to insure enough volume of sales in each category, to have a relevant median price per square foot. I eliminated lots in excess of 13,000 sf so the “extra” land doesn’t skew the data.
The photo above is a tri-level. When you’ve been in the business for many years, you can pretty much know the floor plan of a house without ever needing to go inside. When a house looks like one story from one side and two story from the other, viewing it from left to right while standing only in front of it, that is a tri-level. You will enter on the main level which has the living room, dining room and kitchen. After you are inside the main floor (and not when you immediately enter the front door) you will go up 4 or 5 steps to the bedrooms or down 4 or five steps to the family room that exits to the yard, usually via sliding glass doors. The garage entrance is on the other side of the family room and no portion of the tri-level is underground. That is your basic tri-level and you can tell that without having to go inside.
The home pictured to the left is a split-entry home. For those reading this from outside of the Seattle Area, you may call a “split-entry” a 2-level, a bi-level, a raised rambler or a raised rancher. All are referencing the same style of home called different things in different areas. Basically it is a rambler with a basement, most often but not always a daylight basement. The underground side of the basement is raised high enough for there to be windows.
The front steps take you up to the front door that looks like it is centered in the middle of the structure. Once you walk in the front door you have to go immediately up or down from the foyer to access any of the rooms. It is a rambler with a basement that is not fully underground at any point. A rambler with a daylight basement is basically the same home, but the street side of the basement is fully underground, so you enter at street level onto the main floor.
Now let’s do some stats on the differing home styles. PPSF = Price Per Square Foot.
Rambler/One Story Home – median price $491,500 – median sf 1,470 – median PPSF $334 DOM 26
Rambler w. basement – median price $699,000 – median sf 2,760 – median PPSF – $253 DOM 30
Some people think that the smaller square footage is creating the higher price per square foot. What is really happening is that the main level is valuing at $334 per square foot (same as the rambler) and the basement level is valuing at $172.50 per square foot. For instance the 2,760 sf divided by two, equals 1,380 on the main level times $334 equals $460,920 for the main floor “rambler portion”. The difference, $699,000 minus $460,920 = $238,080 for the basement divided by 1,380 sf equals $172.50 PPSF for the basement. That averages $253 PPSF for the whole house as to finished square foot and does not include the garage or unfinished/not heated basement area. It’s a bit simplified, but hopefully you get the gist of that. Same is true for the split entry.
Split-entry home – median price $510,000 – median sf 2,150 – median PPSF $237 DOM 30
Again, the main level of 1,075 sf of the split-entry is valuing the same as the rambler at $334 or $359,050. $510,000 minus $359,950 = $150,050 divided by 1,075 basement sf = $139.58 for the basement sf and that averages to $237 PPSF for the whole house. In reality above ground square footage values higher than underground square footage, so if the basement is all underground on either the rambler or split entry, the basement square footage would value for less than a “daylight” basement and the fully above ground portion would value for more than the partially above ground portion. So don’t pay the same for a fully underground basement as you would a daylight basement.
Two Story Home – median price $750,000 – median sf 2,760 – median PPSF $271 – DOM 39
Two Story Home w/basement – median price $1,097,000 – median sf 3,920, median PPSF $280 – DOM 59
The two story home with a basement does not get “diluted” in value by the basement because it is basically the top choice of available homes, there are fewer of them and almost half of them have a lake view. The builders will put the most house, 2 story plus a basement, on the priciest lots with views. So there are a lot of factors that create what looks like full value for the basement on these 2 story homes, when in reality it is an external “plus feature” doing that. Only 4.7% of splits and 1 story ramblers have a lake view, 11.4% of 2 story homes without a basement have a lake view and 42.8% of 2 story homes with a basement have a lake view. 31.8% of the big ramblers with basements have a lake view, so adjust for that as well.
The longer days on market has more to do with higher total price of home, than home style.
The tri-level pictured at the top is only valued at $268 per square foot, even though all of the living square footage is above ground. There are fewer of them, but that does not make them more desirable and a higher PPSF, because when you chop up 2,000 sf into three levels, no level seems large enough. When you put the family room on the main floor next to the kitchen it values higher on the main level, than when you put it down on the basement level. If you can see into the family room on the lower level from the kitchen, it values higher than if you can’t.
It’s really common sense when you think about it that way. With more and more people using price per square foot as an indicator of value, I hope this post gives you a little more info to help you to refine your DIY valuation process.
Have a great day!
Ardell,
You did a great job on this; I watched you work a long time to condense and simplify a mountain of information into readable context. Well done!
Thanks honey 🙂
Ardell,
How would one account for lot size. Or thru street vs. cul-de-sac? It seems like this should factor in somehow…after all you buy a property when you buy a “house”.
WoodinvilleHomeowner,
When dealing with price per square foot valuations, which has become a trend as much as Zillow Zestimates, you can only go so far. Land considerations utilize a different method than PPSF.
In areas of tear downs, you value the lot separately from the house, and it’s a completely different method of valuation depending on the age and “functional obsolescence” issues of the structure.
In areas like Woodinville it’s more like Goldilocks and the Three Bears. Same issue somewhat for Bridle Trails Bellevue. Land = Not Enough, Just Right or Too Much.
In areas like Woodinville, the comps are generally somewhat equivalent as to size of lot. You don’t get more for a little more, and too much can work against you as opposed to for you, unless it is a newer home on a large lot or a better home on a large lot. For the most part your neighbors and the comps are rougly equivalent, and no adjustment is made for lot size differences within a neighborhood. It’s more about better location in the neighborhood vs. more or less land.
Big issues in Woodinville are “Which side of Avondale?”, overimproved for the neighborhood, too much deferred maintenance, etc… Woodinville values off of itself and does not value off of KBR (Kirkland, Bellevue and Redmond). It is its own pricing unit and the comps for it are in Woodinville., and to some extent on the same side of Avondale as your house and not on the other side of Avondale.
All too often large lot also equals old house, so the factors balance each other out compared to smaller lot newer house. But large lot AND newer or better built, well maintained and updated home is the hands down winner. Case in point: The Farm
Very good information Ardell. Thanks for explaining all the terminology. Apart from the question asked above regarding accounting for land prices, I have a question regarding location. I have heard people mention that location is the first thing that you should consider when buying/selling a house. How does one evaluate a location? Are there any general rules or is it a completely subjective factor? e.g. is closeness to school building a good thing or a bad thing? Are these criteria different for different types of houses?
Schools: For people relocating it’s all about the info on the internet, test scores, etc… so if you are in an area where your probable buyer is relocating, test scores are king (though people hate that). Can’t get around that. A parent has to look at what is available to them and judge accordingly.
If your probable buyer is a local, then word of mouth “best school” can often be more important than fluctuating scorings.
Close to school is good. Seeing the school from your living room window and being in the morning pick up and drop off traffic is not.
Good location is kind of like good restaurant. What people say about it has a strong influence. Everyone loves it then everyone hates it and likes some new place. That is particularly true of condo buildings.
Single family home is often about walkable neighborhood, not so small that your child ends up riding his bike on a busy road, etc…
There are different methods of evaluating from outside of the area, relocation, vs. a local person. For relocation, getting the free lunch stats for elementary schools can be very helpful. 70% on free lunch vs. .02% on free lunch can be very telling. Not at the high school level though and not so much on the middle school level either. Kids will starve before applying for free lunch when they get older.
Lots of sun, dark and in the tall trees, crime rates, noise factors, busy road, neighborhoods that wind and don’t invite traffic cutting through the neighborhood. Lots and lots of factors.
General rule of thumb, if it looks too good to be true…it is. If you are getting way more for your money than the area would suggest…start looking for “the monster”. The house that gives you the least for your money is often in the best area. The house that gives you the most for your money is often in the worst area.
Hope that helps a little. It’s a pretty open ended question.
Thanks Ardell. Great info.
I use what appraisers use.. Price per square method.. It applies much better here in Florida because all the homes look the same with similar interior features..
…and you don’t have basements either.
You are very welcome WH.
I have to disagree with the claim that the smaller price per square foot isn’t due to larger size. It is. It can also be due to different attributes too, such as the lower area of a house not being as nice. But if you had two identical style houses, similarly appointed, and same number of beds/baths, the larger one will sell for less per square foot than the smaller one. But yes, a house with a good portion of it’s finished square footage as basement or daylight basement won’t sell for as much per square foot. Conversely a house with an unfinished basement will sell for more per square foot over one without.
As to lot size, it’s clearly a factor too, so it’s good that Ardell limited it in her data. But it too has diminishing returns. I’ve seen situations where houses on one acre lots were selling the same as houses on two acre lots, but there neither lot could be further subdivided.
Kary,
I just did a quick check in Bellevue for 1 story no basement. The smallest one sold for $325 per square foot and the largest one sold for $373 per square foot.
If you use real facts and comps you will find that perception does not match reality. Check 1 story homes in the same neighborhood and I think you will find that smaller does not have a higher price per square foot. Most often lower price per square foot for larger will be about basement or lower level square footage.
Going UP to bed costs more than going DOWN to bed.
Well, you need all things being equal. Otherwise you’re repealing the law of diminishing returns. 😉
I think I’m just more conscious of people’s need to have a method they can understand and that works. Price per square foot has become a popular method of valuation, as people don’t want to have to rely solely on an agent’s opinion of value.
It’s one thing to tweak the end result or privide some advices as I did this morning at 60-01 regarding the differences of location and finishes. But people still like to have a scientific method they can grasp.
I was amazed that there were no available rentals in 60-01 and few for sale. A complex like that of over 700 properties and 8 or so floor plans, lends itself fairly well to price per square foot valuations tweaked for condition and location.
The swan was nesting and the Dad swan was chasing away the cat. Work can often be great fun. I then headed over to Green Lake to present an offer over at Lake & Co and Green Lake was mobbed! You’d think it was the first and last great sunny day…oh yeah, it kind of is 🙂
I’m near 60-01 and when walking by check out the board of units for sale. Occasionally contemplate purchasing one for a rental. A lawyer friend said one reason 60-01 condos sell so much less than area ones is the HOA dues are close to $700 a month from having to replace the electrical and siding on all the units plus the upkeep of the golf course, lake and small work out area. Something about faulty wiring and leaking. Any truth to that? I have yet to actually go inside but the grounds are nicely mantained.
The dues are based on value vs. square footage. The nicest and highest are about $415 a month right now.
There is a lot of area to maintain, so the dues really can’t be lower. 8 elevator buildings, 10 acres and lakes and fountains and a huge clubhouse, etc…
I think the dues are appropriate for what they have to maintain. I saw some newer roofs, great quality. Not all done yet, but the ones that are looked fabulous.
The value issue had to do with no loose financing there for a long time. While everyone was getting 100% financing making prices jump, 60-01 could not be bought with zero down. That held it back for a long time. They are over double in value since that situation changed, but still relatively low compared to the rest of the area.
With over 700 units, there’s always something that needs fixing. But that’s normal. I’d rather see a complex fixing all the time instead of keeping dues low and buildng up deferred maintenance.
Still you have to be careful about price and choosing the best value. Often a substandard unit will try to get the same price as the better one that just sold. So you have to stay on your toes.
But if they had to pay for a siding job, due to defective siding, that would make their dues out of range with other units. I’m not familiar with that particular unit, so I don’t know the story behind their siding. Seemingly, however, sometime after 1995 siding became a difficult product to install on multi-family housing–particularly in Snohomish county. Often the builder ends up paying most/all of the tab, but if they didn’t for some reason, that would be a budget killing project.
I saw on project last year with high dues and not immaculate upkeep. Not a good combination.
Kary,
Not so. A siding job should be a one time special assessment, not a dues increase in a condo complex.
The dues have nothing to do with “work” specifically”, simply lots and lots of operating costs for such a large place as well as a need to keep high reserves.
If you look at a reserve study, you will see that one of the major needs for reserves are elevators. Sixty-01 has lots of townhomes, but they also have 8 midrise buildings with elevators. It may look like they have a lot of reserves when they are over a million in reserves, but when you look at the reserve study and the cost of replacement for such a large complex, the amount is not necessarily sufficient simply because it is large.
Improvements do not cause dues to go up if the reserves are maintained properly. Improvements should have nothing to do with monthly dues jumping up and down…if the HOA knows how to structure things properly.
WA does not have as many safeguards in effect as CA in that regard, unfortunately.
Where are Sunday night stats???? It’s Sunday night in South Beach.
LOL! I was working on a flyer. Now I’m eating dinner! Stats will be late…as usual.
It’s more like Monday Morning Stats by the time I get them up 🙂
I live just down the hill from 60-01. Special assessments will be ongoing for those structures for the remainder of their life.
Why?
Because of STUPID architectural design that is absolutely NOT suited for a wet climate like we have here.
On buildings with absolutely no roof overhang, 100% of the walls get wet during rainy weather (especially true of two-story and taller structures). This water runs down and sits on every window sill, ledge, siding joint, protrusion, and opening on the surface of the wall. If each and every one of these locations is not perfectly sealed, the water gets inside the walls and the building starts rotting from the outside-in, or inside-out (and let’s not even mention the ‘M’ word).
In a poorly-built wood-framed building (typical of many apartments and condos) that is always growing and shrinking due to changes in humidity, it is very difficult to keep everything sealed, especially when contractors use 99 cent/tube caulk that may actually seal for only the first year or two.
And then there is the so-called ‘stucco’ that they love to use on mulitple-unit buildings around here that isn’t suited for our climate either. I have seen numerous buildings of this type require a complete re-skin, at considerable expense to the building owner(s).
Buyer beware. You need to clearly understand the quality of construction and climate suitability of any multiple-unit building that you are buying into. Ignorance may cost you dearly at a later date.
One of the bonuses of my 1970s rambler is that it has generous eaves which keep virtually all of the walls dry during a rainstorm, unless it is really windy. So even if I have gaps in my siding (I do – it’s vertical cedar), I don’t have to get all stressed out about it. Look at the design of your own structure and see if it makes sense for the location and climate.
I have generous eaves and vinyl siding. 🙂
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