Selling real estate in the Foothill communities of Los Angeles, I have seen numerous home buyers, sellers, and other Realtors attempt to use price per square foot as an indicator of value.  While average price per square foot can provide a range of value, it is a poor tool to use to pinpoint market value.

There are a variety of reasons why price per square foot can be like comparing apples to oranges.

1) Quality of construction:  Was the home built in the most cost effective manner? Or was the home custom built with no expense spared? Obviously the quality of the construction plays a major role in the cost per square foot. 

2) Amenities: Are we talking granite, marble and fine woods, or wall to wall carpet and vinyl?

3) There is good square footage and bad square footage.  Examples of poor square footage would be a tandem bedroom, a bedroom located on a level without a bathroom; basically square footage that is not conforming.

4) Location: Obviously a home across the street from the freeway is going to sell for a lower price per sq ft than a home sited in the most prestigious area of town.

5) Lot size:  It’s not just the size of the lot, but is the lot usable?

This La Crescenta home located at 3905 El Caminito closed escrow on 12/2/10 for $529,000 or $333.33 per sq ft.  3 bedrooms, 2 baths, 1560 sq ft on a 7,405 lot, attached 2 car garage and den.  Agent’s MLS remarks read (I can't take credit for their typos):

Location! Location! Location! First time on market in over 50 years. High above Foothill, incredible opportunity to make it your own. 3 bdrms., 1 3/4 bath, liv. rm with frplce, den w/sliding glass to patio, laudry rm off kitchen. Exposed wood floors in main rooms, vinyl/tile in kitchen & baths. At the end of a cul de sac street.




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And in the same city, two and a half miles away, this La Crescenta home located at 2621 Willowhaven closed escrow on 12/2/10 for $645,000 or $411.35 per sq ft. 3 bedrooms, 2 baths, 1568 sq ft on a larger 10,400 lot, attached 2 car garage. Agent’s MLS remarks read:

Ultimate La Crescenta Location with Large Lot and Views. This immaculately maintained home is in the sought after area of La Crescenta and has potential for a pool. Was professionally landscaped and has a patio for great entertaining. This 3 bedrooms, 2 bath home has a spacious master bedroom , living room with fireplace, nice entrance, kitchen is open to dining area and has kitchen counter with stools. Attached garage completes this well designed floor plan. Has Award Winning schools! The home has a serene and tranquil setting and the inside is bright and cheerful. A must see!!!

Each home is sited in the more desirable North of Foothill location, both kitchens could use a remodel, each home offered an attached two car garage.  The primary difference was the 3,000 sq ft difference in lot size. 

As there can be so many variables, taking the average price per sq ft and multiplying  by the square footage of the subject property is not always an accurate indicator of market value. The price per sq ft, simply provides an average.  The price per square foot is useful in examining market trends; Are prices going up? Down? Stabilizing?