At the beginning of March, a colleague of mine asked me to keep an eye on her listings while she was away on a well deserved vacation with her family. Of course, I accepted. Realtors are human too, and I’m a firm believer that what comes around goes around. You never know when you’ll need to call on a favour from someone, and it’s just good practice to pay it forward when and if you can.
So, two sunny Sundays ago, I accompanied my colleagues’ clients, a young couple looking for their first home together, to some open house visits in the lovely borough of Notre-Dame-de-Grâce (NDG). They had been searching for several months and had a long list of non-negotiables. Because that list of must-haves was so long, they were beginning to feel discouraged that they might never find their dream home. Despite having previewed multiple homes with my colleague, which should have provided them a very realistic understanding of the market in NDG, they were standing firm and holding out for "the one".
I accompanied them to the first open house (which already had an offer on it, as is often the case in NDG), and overheard the couple talking about tearing down walls, moving around the orientation of the kitchen appliances, and adding a second bathroom. Squeezing past other buyers and real estate brokers in the narrow hallways of the home, they further remarked that the basement was too drafty, the bedrooms were too small, the master bathroom would require an overhaul, the wood burning fireplace in the living room would need to be pulled out, and the curb appeal of the house was given a grade of below average. It was crystal clear to them and to me, that this house was not "the one", although for all intents and purposes, it ticked off a lot of other boxes on their list - especially when it came to price.
En route to our second house visit, I asked the clients about their long non-negotiable list. Having visited almost everything in NDG, they confessed that after moths of looking, they were feeling antsy that they wouldn't be able to find anything that would match all of their criteria. My initial diagnosis of analysis paralysis was confirmed. I calmly explained that maybe they needed to take a little break to absorb everything that they had seen so far. They could use this time to separate their long wish list into the things which they deemed were their real deal breakers, versus the things that they would actually now be willing to compromise on. Sometimes, when a buyer has seen so many houses, it’s easy to lose sight of the goal. They really needed to refocus.
One of the clients then looked at me and said, "You know what, Gemma? What I actually really just want is a deal. I buy things on sale. I want to pay a reasonable price per square foot." Sensing a teaching moment, I replied, "I can understand that you want a good deal. I think everybody does. But let's say you find a house that you really like that fits most of your criteria, and then there's another one that's just ok, but it's less expensive. Will you seriously discount the one you really like to settle for the one you like less, just to say that you bought the least expensive house on the block?" She shook her head no.
So I continued, "And if you wait until you find the house that checks all of your criteria instead of any of your criteria, you're never going to get into the market and put down an offer. At some point, you're going to have to break the ice." At this point, her partner, obviously weary of their large volume of visits, was also nodding.
"In terms of price per square foot," I paused, "Sure, it's a consideration to think about when purchasing a home and we’ll do everything possible to get you the best price possible. But I have to say, I've never actually heard any of my clients say, 'I love my new home. Can you believe it was only $208 per square foot? It was the bargain of the century.’” The car erupted with laughter.
"We always thought price per square foot was important though", they protested.
"Yes and no," I replied, "Twenty years from now, I guarantee that you won't even remember the price you paid per square foot for your house. You will remember the memories you had in it. You'll appreciate its architecture, its location, how you decorated it, any significant renovations undertaken, your neighbours, house parties, dinner parties, birthday parties, milestones - overall, how the house became a home, and how the house made you feel. Safe, secure, happy. All of these things…these are the things that matter, and they are priceless.”
I know that some of you reading this right now might not find my answer very satisfying. So I could end the story here, but here’s my other answer, for bonus marks.
First, what is the price per square foot (PPSF)? The PPSF is obtained when you divide the sales price by the square footage of the home. Let’s say a condo is $150,000 and it’s 1,500 square feet. The price per square foot will be $100. Following this logic, it's fair to assume that the price per square foot for a smaller home is typically much higher than the price of a home with larger square footage. This is related to the cost per square foot.
The cost per square foot is an important calculation for builders and developers, and used during the construction process. The cost per square foot is typically higher for a smaller home than it is for a larger home. If you’re planning on renovating your home, this can be an important calculation to consider. As a rule of thumb, the cost of renovating an older home is typically more expensive than renovating a new home.
An important caveat to understand is that the price per square foot can vary greatly in a neighbourhood for a variety of reasons: the location of the house, any upgrades installed, the condition of the home, and any improvements made. A low price per square foot can therefore translate into a higher cost per square foot when it comes to renovations.
So what is the price per square foot a useful indicator of? Well - looking at the median or average price per square foot with similar homes in a neighbourhood allows us to determine trends over time. If we compare the price per square foot over among comparable homes over a 12 month period in a particular neighbourhood, we can see if values in the neighbourhood are rising or falling to determine if an investment is worthwhile.
That said, the price per square foot is not the only thing you should consider when purchasing a home. It says nothing about the quality of the home, the feeling you have inside of it, or if it’s a good reflection of your personal taste.
Do you agree or disagree? Holler at me: firstname.lastname@example.org.