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How does a real estate appraiser estimate square footage adjustments?

An appraiser will typically "strip away" market reaction to other home attributes when determining what their GLA (Gross Living Area) adjustment might be. This is the primary difference between the way an appraiser looks at GLA, and the way most realtors look at GLA.

The majority of people seem to consider “price per square foot” to be a simple reflection of dividing the sale price by the home's total gross living area (GLA). Appraisal reports reflect adjustments for all significant market driving factors in their analysis, of which GLA is just one of many. Common examples are things such as pools, garages, lot size, location appeal, view, condition, and upgrade levels. We believe you will find your estimates to be far more accurate when these other factors are considered in your calculations. See the examples below:

Example 1 - Basic Condo Unit

The subject unit has no significant views and is 1000 sf under air. A comparable sale has a prime ocean view and is 900 sf. Let's say that the unit sold for $250,000. This puts the comp at a $278 price per sf. Going strictly by price per square foot, the subject would be estimated to be worth $278,000 (1000 sf x $278).

When an appraiser looks at that same information, they will adjust for the most significant differences first. In reality the adjustments are all simultaneous, but for the purposes of the discussion, it helps to think of it as being last in the process.

In this example let's say the appraiser has determined that the view is worth $50,000 in contributing value. After adjusting for the view, the comparable sale represents a value of $200,000 which we then divide by the 900 sf living area to estimate $222 per square foot for the value of the unit itself. Now the subject estimate is $222,000 because it has no view.

In reality there are usually many factors that must be adjusted before determining a price per square foot. For a condo you may have differences in floor location, garage or other parking spaces, balcony sizes, and of course condition/upgrade levels. Those are just some of the factors for properties in the same building, and comparison with units in other condominium complexes could have a myriad of additional appeal differences.

Example 2 - Single Family Detached Waterfront Home

Our comparable sale in this example is a single family home located on a corner point lot on the intracoastal. The site has 300 feet of linear front feet along the waterway, a lot size of 20,000 square feet, and a living area of 3,000 square feet. This home sold for $1,000,000. This home sold for $333 per square foot.

Now let's look at the subject home. It is located on a finger canal with only 100 feet of linear frontage, a lot size of 10,000 square feet, and a living area of 2,500 square feet. If we only look at price per sf then the subject is worth $333 x 2500 = $832,500.

The appraiser determination of price per sf will looking something like this: After reviewing other market activity, it is determined that intracoastal views command a premium in comparison to canal views of $75,000. The differences in lot size are found to be $20 per square foot. The linear footage is found to carry a premium of $100 per linear foot. What is our price per square foot adjustment considering only these factors?

$1,000,000 Sale Price
- $75,000 Superior View
- $200,000 Lot Size Variance ($20/sf x 10,000)
- $20,000 Superior Front Footage
$705,000 Net value

$705,000/3000 sf = $235/sf
The value for the subject is now estimated as $235 x 2500 = $587,500

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