Assigning a number value to a home is done in many ways. One side of the argument is that a house value is based on what someone is willing to pay for it. Others take a more mathematical approach to determine the monetary value. Reality is, knowing your price per square foot (PPSF) and the resulting impacts on both the listing price and the time on the market is an invaluable tool.
To calculate your PPSF, divide the cost of the home by the number of heated or cooled square feet to get the total. This is not a perfect calculation, as additions like a swimming pool, kitchen and bathroom updates, and upgrades such as high-end flooring and finishes can also add to the overall value of a home.
Location also is a huge factor, as are many intrinsic qualities of a home. We have all heard the phrase, "location, location, location," when it comes to real estate. While the PPSF is just a number, it's one that should be scrutinized when determining how much your home is worth. Square footage and home value are something to seriously consider when it comes time to resell, as you will be competing with other nearby homes.
Related: Learn about VA home loans
House hunting for military families involves both the short-term plans of the next 2-4 years but also what the resale value will be when it comes time to sell, or what value it would have as an investment property in the long term. We have all heard the wisdom of, "Don't buy more house than you can afford," but how can this maxim also translate to, "Don't buy the biggest house on the block?"
Having the biggest home in the neighborhood has historically meant that the overall value of your home will not increase at the same rate as surrounding homes. The appreciation rate is slower for the largest home. This also means that the appreciation rate improves most rapidly for the smallest or least desirable house on the block. Any improvements you make on the biggest home may not pay off in a timely manner when it comes to the value of the home.
As for a home appraisal, it may be difficult to find comparables in size with homes surrounding yours. If your home doesn't appraise for what you think it's worth, you may have a difficult time recouping any equity or profit in your home and finding a buyer who can qualify if the appraisal doesn't meet the sales price.
Here's the rub: Have proof of your home's actual square footage verified by a trusted professional. Make sure your tax records show an accurate number or consider having a home square footage certification completed. Ensure that your home's appraisal accounts for all of the important variables for a home valuation.
By doing your due diligence to ensure an accurate accounting of your home's square footage and value, you can then take the necessary steps to purchase a home within a comparable "median range" of square footage among your neighbors and nearby homes. When it comes time to sell or relocate, you won't have the worries of being the biggest house on the block. You will ensure that your home has time to appreciate and sells quickly, based on the right pricing and timing of improvement.
This article originally appeared in the Millie Journal.
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