HomeArticles & InfoBooksBlogCoursesYouTube Videos


  Institute of Housing Technologies
Improving the Real Estate Information Network
The Currency of Real Estate
Size or square footage is, and always has been, one of the most 
important factors in the home valuation process. Other than 
location, more weight is placed on this one component than any 
other item of comparability. Does the home have enough space 
to meet a specific buyer’s needs; rooms, room sizes, layout, and 
offer sufficient living space for their intended use? Square footage or gross living area provides a comparison; although not always accurate, it does offer an estimate by which to establish a logical value based on comparison with other similar properties. The total finished floor area or the size of a house is one of the most important things a potential buyer needs to know. Square footage is more than just the “currency of real estate,” it is the very foundation of value.

All residential real estate comparisons and valuations are directly influenced by size or square footage. The accuracy of this data is one of the most influential considerations in determining a property’s current market value. 

  • How big is your home? 
  • What's it worth? 
  • Does the size affect the value? 
  • Does it matter who measures the house and what measurement method they use? 
  • Is there a difference between a standard and a method? 
  • Do all real estate professionals agree on how to measure a house? 
  • Is the "size" listed in the public tax records always right? 
  • Should I have my home measured before I sell? 
  • Can my agent help me create a fair listing price without measuring my house first? 
  • Is my agent the best person to measure my house? 
  • What about all these new floor plan companies; do they all use the same standards? 
  • Does any government agency regulate this size issue? 
  • Who can I call if I have a question?

You should know the answers to these questions before you sell (or buy) your home. Location and size are the two most important numbers in any valuation process. Size equals dollars and getting it right makes sense. 
Questions You Need To Ask...
1. How big is your home? 

Most homeowners have a pretty good ideas about the size of their homes.Regardless of whether your work in real estate or not, people generally have a perception of value, at least in part, based on size. You may get the information from the appraisal when you bought the house, or some people use the information listed by the local tax office. Interesting enough, most appraisers get asked the question - "do you report this information to the tax department?" Especially when re-fi's were in full swing, homeowners were worried about the appraiser turning this data over to the county assessor's office. Why? Simple. They know the information i wrong and don't want the tax man to find out, so they won't get a tax increase on their home. It's fun t watch the local tax board get appeals from those who know their square footage total is much higher than their actual home. But, what you will not find is a homeowner at an appeal's meeting trying to correct the tax department's inaccurate square footage information. At the end of the day, most people have a pretty good idea about the size of their homes; just ask your neighbors. 
2. What's it worth?      (And, who gets to decide?)

The million dollar question. Like much of the real estate business, "it depends" is a large part of any answer. Wouldn't it be nice if you could pull up a computer program, enter your address, and instantly get the current value of your home? But wait! Don't we already have that? If you search for home values online the sites are in the millions. Evidently millions of companies and people have an idea about the value of your home. If on;y it was that easy. 

All the very smart people who came up with all these fancy formulas and calculations, and offer such impressive looking reports; they must be accurate because they look so professional, right? Surely all these companies wouldn't advertise something they knew was not correct?

An Automated Valuation Product (model, service, etc.) is a product that sounds too good to be true. Guess what; it is. Regardless of all the bells and whistles on the website, and no matter how complex the regression analysis, seasonally adjusted figures, or any other clever math they use, they are all based on inaccurate information. Yes, read it again. They are based on inaccurate information. There's no easy way to say that and I'm sure they will disagree with my opinion about how much influence the square footage has on the overall valuation process. However, after over eight years now of analyzing and studying tax department records, MLS systems, and automated valuation systems from across the country, the plain truth is the are wrong at least as much as they are right. According to our studies, the home valuations listed by the county tax assessor are typically closer to actual sales prices (market value) than any computerized data program. And, the local tax department actually knows where the house is located and someone from the tax office has seen it in person. Something, these mega-home valuation services cannot say. 

However, where's the profit to be made in that? For all those who believe automated valuation programs are accurate enough for ballpark lending or when the loan percentages are not that tight, who's going to vote for using free information? Well, not free - your tax dollars at work. When all is said and done, determining home values is a business, intended to profit from their perception of value. Many AVM's like to use the word appraisal in their ads, but they are far from an appraisal. They are a service created to make a profit, by providing you with a fancy report, based on information they get for free; provided by your tax money. What a great system. Get your product for nothing and convince lenders you are just as good as a licensed appraiser. Who needs all that training and experience anyway? Just plug in a few numbers in the magic price-per-square-footage formula and instant Guru!    


The appraisal industry was established for a reason and that reason has not changed. In fact, the appraisal industry should be more important than ever. The errors within tax records and computerized valuation products will become more apparent over the next few years as they are studied by others not involved in selling their products. The question is, will all the good appraisers be gone by then; and who will train the next generation. Consumers lose again.  
3. Does the size affect the value?