Have you ever wondered if there is a value difference between a single-story house and two-story house? Is it proper to list your home at the same price level as a similar-sized house that has one extra level?
I asked some Sacramento area real estate pros to pitch in a few thoughts, and here is what they said:
Sue Galster – Realtor/Broker: By default, a one-story house appeals to a wider range of current home owners and future buyers than a two-story house. Rarely if ever do I meet a buyer who says they need or prefer a two-story house, but it’s quite common to hear that a one-story is a non-negotiable. With the aging of the Baby Boomers and people living longer, I believe more home owners will require a one-story house for health and safety reasons so that stairs aren’t an issue in their lives.
Steve Ostrom – Realtor/Broker: Over 30% of my clients say they must have a one-story. Another 40% say they prefer a single story. That is around 70% targeting single story. The number one reason they state is that they are getting older and worry about having to climb stairs later in life. The second reason is energy costs of a two-story. My reason is that my wife has a history of falling down stairs. Regardless of the reason, there is much more demand for single story homes than two-story, and supply and demand ultimately determines value.
Whitney Johnson – Realtor: I do think that if you are willing to purchase a two-story home on a same or similar lot size as a single story home, you will obviously get a larger lot, which could be a benefit. We have never taken a number of stories into consideration when comping our properties. We tend to go off the basics, bed, bath, sq ft. When I asked around office it was pretty split. Some would take a single story all day long and have a smaller lot. The other half would prefer a two-story larger lot. Both sides agreed the pricing should be the same.
Jeff Grenz – Realtor/Broker: Single level homes are always in high demand. They typically reach every end of the market from entry-level to empty nester…. so when demand is hot, the single levels typically go first, and when demand is slack, again, the single levels typically go first, leaving more excess inventory in the multi-story homes – unless the prices get adjusted to make multi-story homes a better buy. It actually costs less to build a two-story home vs a single level in most cases, given the same square footage and amenities, so builders are often able to balance the higher demand for single level homes with the better pricing for two-story homes. So if square footage is your measure of “value” than a two-story home, as efficiently shaped as possible, will give you the best “value” – a definition of an efficient building shape? Think “salt box” like the east coast. If accessibility is more valuable, and IMHO, higher demand for resale, then single levels are the best “value”.
Craig Dunnigan – Realtor/Broker: I have always held the opinion that single story homes sell for more money than a two-story of equal size….this is based on observing sales trends for over 35 years…. my opinion was confirmed today at our sales meeting. Our agents unanimously stated that single story homes are in higher demand and sell for more than most two-story homes…. The aging “baby boomers” don’t want to be walking up and down stairs. The bottom line is “supply and demand”…..there is not a vast supply of single story homes coupled with a high demand!
My take as an appraiser: I tend to compare single-story with single-story and two-story with two-story because there is sometimes (not always) a difference in value. Unfortunately there is no universal value adjustment given for a variance in stories because it really depends on the neighborhood as well as supply and demand. I have noticed among higher-end tract homes that buyers typically pay a premium for single-story units. As an example, a buyer would very likely pay more for a 2800 square-foot single-story house than a 2800 square-foot two-story house with similar updates. Whatever the case, it’s usually best to start a market comparison by using single-story comps when appraising a single-story house and two-story comps for a two-story unit. This tends to give us the best picture for value because we’re comparing “apples to apples” so to speak.
Question: Is there any price difference in your mind? I’d love to hear your take in the comments below.
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I do the same, Ryan. Try to compare apples to apples. If I have to use a home with a different number of levels, I use it as a 4th or 5th comp and give it less weight. It is usually difficult to adjust for different stories due to lack of data or unable to isolate that one factor.
Good for you, Bill. I think that’s the best way to go. Thanks.
Great post, as always Ryan … with our buyers, if they’re flexible about single or two-story homes, you will often see the request of having “the home must have a good size, first floor bedroom with full bath.” People are thinking about how they will age with the home, particularly if the home is intended to be their “forever” home (or for a longer duration of time).
Thanks Heather. I’m so glad you mentioned that because it’s a great point. It seems many builders are aware of this too, so they put a full bath and bedroom downstairs. That instantly helps the house be more appealing for the long haul.
Denton county in Texas uses something called a Comp Equity Grid in assessing sales comps values for tax purposes. This effectively takes an apple and a pear and tries to make them more equal on $/ sq ft and market values to justify what they are assessing the owners property. It disadvantages the owner as they can add or subtract from a comp to make it comparable to anything even a single story vs a two story. We protest and fight every year against this and never really win.
Thanks Jim. That’s interesting to hear. This program sounds neat and I like the concept of trying to level out the comps. That’s actually good stuff because we want to reconcile differences between “apples” and “pears” so to speak. Yet it’s too bad real estate doesn’t always work out so perfectly as if we could just apply a one-size fits all formula to calculate the value difference of a certain something. I understand this for a mass-appraisal process used by an Assessor, but I’m skeptical it really cuts the mustard in the real world where the value of something can be far different depending on the price point, location, and even market conditions. Thanks for sharing.
You understand perfectly. The comp equity grid is for mass assessment. The county wants highest assessment for tax rev and homeowners want lowest tax bill. We have to do research build individual case and fight county. I have single story home and county constantly uses bigger comp grid two stories ratcheted down. I argue a square foot is a square foot up or down. They counter with the opposite. So the battle has become annual. ?
Sorry to hear that Jim. Just keep fighting if there is a fight to be had there. I’ve appealed my property taxes before when there’s been a disparity, but that hasn’t been an issue for years since the market turned around. Just do your best. And hopefully the Assessor can be reasonable and use an “apples to apples” approach instead of just a mass formula. Both are important here.
Thanks for this article, reading here in 2020 while trying to decide between single or two-story home!
Hi Joe. Sorry for the late reply here. I’ve had some health issues and I’ve been away from my desk. Good luck in your decision.
Hi Ryan, it’s Jill reading this on 3/28/2024, LOL. Sometimes I feel the biggest challenge when pricing a property is finding good comps. So where there are not enough 2-story comps for the subject, do you use 1-story instead or go back further, like one year, to see if a good comp could be found? Also, do you adjust on lot size variance? TIA!
Hi Jill. Thanks for finding this one from the past. Love it. I think today comps are challenging since volume is down so much. I actually might write about that really soon.
I prefer going back further in time in the immediate neighborhood first before going out further to other areas. There is technically no right or wrong way to do this, but we just have to be sure we’re making adequate comparisons. The danger is sometimes people only go out further today, and what if those other areas trend differently?
In my mind, it’s good to first understand how the market has behaved in the immediate area, and then there’s nothing wrong with trying to go out further to look for some competitive areas. A former colleague does this, but exactly the opposite (out further first and then closer). To me, I like focusing on the immediate area and then expanding if needed.
In this example, we could go back further in time and see if there was any difference between single and two-story units to get some historical perspective. There is nothing wrong with look at years of sales here to help educate us. We might not use those really old sales as comps, but we could use them for research. Granted, the market could have changed since that time, but that’s why we also likely want to look at some nearby competitive areas too.
And yes, lot size ought to be adjusted if there is a difference in what buyers are willing to pay. The ideal would be to use comps with a similar lot size so we don’t even have to make an adjustment. Like the saying goes, the most similar comps don’t need adjustments.
Hope that helps. Comment, text, or DM anytime. Thanks.