Why Price-Per-Square-Foot Is a Shaky Data Point

People love to talk about the price-per-square foot when comparing San Francisco property values. There’s also a tendency to reference this type of information when making a decision about how much to pay for a home.

But I don’t recommend using price-per-square foot as a reliable data point, because it has its flaws.

The bottom line is that there’s no standardized square footage source. So square footage quoted in the MLS and marketing materials is typically based on either tax records or past seller appraisals.

It’s no secret that tax records can be wildly inaccurate and outdated. Assessor-Recorder Carmen Chu recently visited our sales meeting at Zephyr and talked about how antiquated the city’s computer systems are. Throw in the fact that our tax records go back to the early 1900s, with some having disappeared after the 1906 earthquake. Even if sellers make an honest effort to update their own tax record through city channels—for example, if they’ve added a legal bedroom and bath—the square footage they’re adding isn’t based on one standard source.

Equally important is the fact that San Francisco’s housing inventory varies, from houses with unwarranted bedrooms and units to TICs that represent a percentage of their overall building. Unwarranted, or “illegal” rooms are those completed without permits, and those spaces are not recognized as part of the overall square footage. TICs will not have a registered individual square footage count in the tax records; the number stated usually represents that of the entire building. It’s virtually impossible to compare apples to apples when it comes to this data point.

Past appraisals could be accurate, but I’ve seen cases where there are two or three appraisals on hand that have all had different square footage counts. And as you might expect, sellers and agents typically reference the highest number. As one agent recently commented to me, “The square footage sometimes grows over time.” She mentioned one property in particular that had changed hands three times over a ten-year period, and each time, the square footage increased in the MLS.

Square footage is strongly referenced in new-construction condo developments, because buyers are paying well over $1,000/square foot for such properties. However, there have been cases when buyers discovered that the square footage quoted for a particular unit was more than the actual size. And when you’re paying $1,000/square foot or more, that can make a big difference.

So if you’re comparing values by price-per-square-foot, do so with a grain of salt.