Why Doesn't a Big Bear
Appraiser Use Price Per Square Foot to Determine Value?
"What is the price per
sq ft?" I get this question often from realtors and
homeowners. Because this is a common method of comparison, I thought I
would explain how appraisers view this approach to value.
The price per sq ft is the
most familiar method of comparison that many people are aware of.
Remember that everything about the property is summed up in the price per sf,
including the lot size, view, age, quality, condition, and other features, all
lumped together into a price per sf. Because of this, it is important to
select sales that are very similar to the home you are appraising and from the
If you have a home with a 2
car garage, or a larger lot size, or superior view and are comparing it to a
home with none of these features, the accuracy of your estimate will be
reduced. This is also true if you look at a home that is significantly
larger than yours, even though all other features are equal, because a larger
home will typically sell for less per sf. This is the principle of
diminishing returns that states the more square footage you add the less value
you get for the extra area.
Homes in Big Bear were
individually built on vacant lots from back in the 1920's to the present.
You have large and small, old and new, custom and basic construction mixed
together within the same tract or neighborhood. As a result, the price
per sq ft method of valuation is unreliable. The exception to this is the
Maple Ridge tract across from the Big Bear High School, because these are
similar in age, lot size, only a limited number of models exist and the design
and features are very similar. There are variables, primarily limited to
upgrades of exterior siding and interior finish work. This area is one of
the few in Big Bear, that is similar to tract housing, found down the
Price per sq ft may be a good
indicator of value for tract housing. Appraisers however, are required by
lenders to select recent sales "comps", in close proximity to the
house being appraised, with as many similarities as possible. Instead of
calculating price per sq ft for these comps, lenders require that each sale be
adjusted for differences, including, lot size, view, quality of construction,
condition of improvements, bedroom/bath count, living area, garages, etc.
The appraiser is required to be geographically competent and to have researched
the area regarding market reaction (how buyers react) to these differences and
make adjustments accordingly.