The square foot method considers the value of the property using the average cost per square foot of comparable properties and multiplies it by the subject property’s square footage. This is the starting point for appraisers and is the most usual form of appraisal report. This method bases a property’s value on what consumers have already purchased per square foot and thus takes into account the concept of supply and demand.
The square foot method calculates the value of the property using the average cost per square foot of comparable properties and multiplying it by the subject properties square footage. This is generally the starting point for all appraisers of residential real estate and is the most common form of appraisal reports.
With many categories and varying prices, many methods creates a sizable margin for error. As a result, many appraisers rarely use anything but the square foot method particularly when then property being appraised it a single family home or commercial retail building.
Example of Square Foot Method
If a subject property is in the process of being developed and is thought to be around 2,500 square feet, an appraiser would then seek a property that is similar to that of which is being constructed in order to get a starting point on how much each square foot should cost. If the property that is alike is valued at $150 per square foot, they would then take that amount and multiply it by how many square feet the new property is projected to be, in this case 2,500.
