Here's how to find out the price per square foot of a home:
Value of home: $160,000
Square Feet: 2,130 Sq. Ft.
(divide the two): $160,000 / 2,130 Sq. Ft = 75.12
Price Per Square Foot: $75.12
So how do you know if it's a good deal or not? You would need to do a little bit of research-ask for past year's (5-10 years) prices of homes in your area.
Your real estate agent can do this for you (if he doesn't know ask him to get it from his title company).
To give you an example, I did a quick research on the last thirteen years in the Reno, NV area (I got the raw numbers from the Reno Bureau of Business & Economic Research).
This is what I got...
Reno Average Sales Price Per Square Foot:
1993: $78 / Sq. Ft.
1994: $83 / Sq. Ft.
1995: $87 / Sq. Ft.
1996: $88 / Sq. Ft.
1997: $90 / Sq. Ft.
1998: $93 / Sq. Ft.
1999: $94 / Sq. Ft.
2000: $98 / Sq. Ft.
2001: $104 / Sq. Ft.
2002: $117 / Sq. Ft.
2003: $136 / Sq. Ft.
2004: $178 / Sq. Ft.
2005: $217 / Sq. Ft.
Basing it from this graph, I would be getting a heck of a deal for the home I computed for earlier in this article ($160,000 / 2,130 = $75.12 Sq. Ft)-- I would be getting this home at 1993 prices!! Through this simple research we found out that we are buying a home at fifteen year's discount ( buying a home in 2009 for 1993 prices)!
This is a real example by the way. My client was looking at this home last week. This gave him a good idea where he stands on the property (he plans on selling it after five years). If you do this basic research you will better see of how good (or not) of an investment you're getting.
Hope it helped!
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