A bigger house is always worth more, right? It’s really easy to fall into the trap of believing that, but it’s not always true. Let’s talk about it.
Myth: Extra square footage is always worth more.
1) Single story vs two story: Sometimes a large single story will sell for more than a larger two-story. This isn’t always the case, but in some neighborhoods we see this dynamic. So just because a 2-story is larger doesn’t mean it’s more valuable (or a good comp).
2) 55+ Community: In a 55+ community we sometimes see more emphasis on floorplan instead of square footage. Larger models still likely command higher prices, but at the same time the market doesn’t seem as sensitive to square footage differences like we see in other neighborhoods. For example, here are two models in Sun City Lincoln Hills with a 107 sq ft difference. Normally that might not mean much in a typical neighborhood, but it looks like there’s a pretty decent value difference here. On paper it seems like these two models could be perfect comps since they are so close in size, but that might not be the case.
3) Layout: At times a house with a better layout will sell on par with a larger house with a less desirable layout (even outside a 55+ community). What I mean is buyers might pay the same for a 1,400 sq ft house with an open layout compared to a 1,700 sq ft house with a less open floorplan. This dynamic isn’t always easy to spot in MLS photos, and that’s why it’s so important for agents and appraisers to communicate. I recommend agents to open up conversation with appraisers about the listing (without pressuring to “hit the number”). What feedback did you get from potential buyers? What were buyers attracted to? Is there anything special about the house or neighborhood? When it comes to layout, this is often an “insider detail” that’s frankly easy to miss, so I can’t emphasize how important it is to communicate about this if it’s a relevant factor.
4) Dangerous to always adjust: It’s easy to get trigger-happy about making value adjustments whenever we see a square footage difference. Can you relate? But sometimes a square footage adjustment might not be needed. My advice? Be careful about always giving an adjustment and be cautious to not routinely give the same exact adjustment too. Try to look to the market to see if there should be an adjustment or not, and then proceed.
I hope this was interesting or helpful.
Questions: What point stands out to you the most? Anything else to add? I’d love to hear your take.