It's a metric avidly used by American agents but less so on this side of the pond. Yet, the price per square foot is a valuable comparison tool. When it comes to comparing like for like, it is a key straightforward metric for an agent to have in the back pocket.
In this blog, we will examine the value of knowing the price per square foot.
Accurate property valuation
You can better value properties by comparing the price per square foot of similar homes in the same neighbourhood. Both buyers and sellers can check that the property is competitively priced. This figure can help to ensure that the seller is receiving a fair market value. If a buyer is on the fence about deciding between two properties, this metric could be the one that makes their decision for them as they can find out which property offers more space for their money! Price per square foot is a useful metric when there are fewer sensible comparables available, helping to prevent significant pricing errors. It can help ensure that the seller receives a fair market value for their property.
Identifying market trends
Tracking the price per square foot can also reveal important market trends and patterns, identifying if prices in the area are falling or rising. This information is vital for buyers looking to enter the market and sellers aiming to set a competitive price.
Comparing properties
Knowing the price per square foot allows for easy comparison of different properties. It helps buyers assess the true value of each property. As an alternative to the price per square foot, UK agents tend to talk about the number of bedrooms as an indicator of size, but this is an unfair comparison when a large bedroom has been split into two or a room has been converted into a bedroom.
Negotiation strategies
Price per square foot data can also be a powerful negotiation tool. You can come in armed with knowledge of comparable properties. If you’re acting on behalf of a buyer, you can argue for them that the property is priced above the area’s average for instance. The metric just brings a level of objectivity to negotiations.
Build client trust
Vendors want an agent that can provide expert advice and guidance. Knowing the price per square foot instils confidence in the agent’s abilities. Trust building is the lifeblood of long-term client relationships. If you’re considered to be an expert agent, you can justify raising your fees!
Investment analysis
For investors, understanding the price per square foot is essential for evaluating potential investment properties. Investors can assess potential rental income and return on investment. Similarly, when flipping properties, investors can use price per square-foot data to estimate renovation costs and potential resale value.
Spotting potential deals
If your stock has an attractive price per square foot, you can use this data to grab attention from buyers and get a sale secured quickly.
Conclusion
Price per square foot does have its limitations as you can’t compare like for like if the locations are widely different. It also doesn’t consider the condition of the property or if it has any high-end amenities such as a gym, pool or waterfront view. A sought-after area, a recently renovated kitchen, or a large garden can all justify a higher price per square foot, whilst a property that needs serious renovation work or is in a poor school district may warrant a lower valuation. Whilst it is just a piece of the puzzle, knowing this metric can certainly help you position yourself as a well-informed agent and assist you with valuations and negotiations.
Our improved Insight tool now displays the average price per square foot of a postcode area. This is valuable information for both buyers and sellers. It standardises the cost relative to space to avoid distortion caused by differing property sizes. Remember, as an agent, knowledge is power.
If you’re interested in finding out more about what other valuable data and insights our Insight tool can unveil, please do not hesitate to get in touch! With our help, we can boost estate agent market share.