Calculate the Average Price per Square Foot

For example, you find the selling prices of three other homes in the same area. You want to choose homes that have a similar lot size, and that are about the same age as the home that you have chosen to purchase. The prices are $78,000, $81,000, and $66,000 for homes measuring 1200 sq. ft., 1350 sq. ft., and 1200 sq. ft. respectively.

Average Price per Square Foot

  • Put these prices in the first column of the table shown below.
  • Put the respective area of homes in the second column.
  • Calculate third column by dividing the values in first column by the corresponding values in the second column.
  • Calculate the sum of column No 3. It is 6.50 + 6.00 + 5.50 = 18.00
  • Divide this total by the number of prices taken i.e. three prices for three homes.
Price of home Area of home

(Sq. Feet)

Average Price

per Sq. Feet

(1) (2) (3)
$78,000 1200 $6.50
$81,000 1350 $6.00
$66,000 1200 $5.50
  Total $18.00
Average = Total/3   $6.00

You can use this average to estimate a home’s market value. For example, if you are going to purchase a home with an area of 1050 square feet, its value will be 1050X6 = approximately $63,000.

Average Price per Square Foot

You estimate the market price of your chosen home at $63,000. Although you will consider other factors, this initial analysis gives you some insight into what the home is worth. For example, an additional piece of information could be that the seller of the home has already moved and wants to sell it quickly. In this case, you might be tempted to make an offer of less than $63,000.

You should consider following factors and use them to add to or subtract value from the initial price of $63,000 for your chosen home