I promised some weeks back that I would comment on this age-old adage. So what are the 3 most important words in real estate? Answer? …Obvious right? – Location, location, location. So why waste a moment blogging about it? Well a new “three most important words” are making their way into first position. Those words are “Price per foot”.
So how important is “Price per foot”? Personally, I don’t put a lot of weight on it. It’s a measure of what exactly? – the price of the home as divided by the square footage. Duh… but is that a relevant statistic? Buyers today sure think so. Why? It’s easy. It’s Zillow. It’s Twitter. It’s BFF, BRB, and LOL. In our rush to do everything in a split second, we’ve marginalized the most important facts about real estate and swapped them for perhaps the least important data point but one that is fast and easy.
Some argue that “Location, location, location” is just a repetitive rule; that PPF provides a real mathematical assessment; it’s quantifiable. However, I have always looks at “Location, location, location” this way: It’s the City or town; it’s the neighborhood; it’s the specific lot or site within that neighborhood. When placed in this context, there is a world of value-critical data in those three words. After all, what’s more important than the city you choose to live in? Then what’s more important than the neighborhood within that city? – Its proximity to the freeway, to the good school, to the hospital, to your house of worship? – Whatever is important to you, your neighborhood is everything. Lastly, the specific site – is it a corner; on a cul de sac, does it have a view or exceptional privacy; is it a large enough property to handle a pool or maybe an RV or horses? Is it the condo on top, or in the quietest spot? “Price per foot” speaks to none of these all important variables nor does it factor in any of those most important characteristics when assessing value – not one! Further, PPF does not take into account the property’s condition, or floor plan utility, bath count etc. – I could go on and on. Price per foot only takes the price and divides it by the square footage. It doesn’t even take into account how many bedrooms there are! Useless? – pretty much. So you ask, “It has to be good for something, right?” I use PPF as a marker; a point from which to start my valuation assessment. Once I get a general sense of what I am looking at, I have to look deeper and then I forget about PPF; it has about as much relevance after that as the color of the front door.
In life there are certain indisputable facts: the sun rises in the east and sets in the west; the Cubs will probably never win a World Series and “Location, location, location” always has been, and always will be, the three most important words in real estate.