Bite-sized pieces add up to a larger meal

Posted on July 20, 2006 by Gene

I wonder how most people quantify the cost of real estate — is it an analytical thing, or do they do it by gut feeling, by emotion?
I think I go by emotion, but there is a tipping point where my feeling about a house doesn’t justify the cost.
There is a house on the next street over which has been on the market for a while. It was originally listed at $675,000, now it has been reduced to $669,500. Outwardly, it doesn’t seem any bigger than my house, but in fact it has three bedrooms and two baths instead of my two br/one bath, and 1,028 square feet to my 830. Still, it looks far too small for that price. When priced by square foot, it comes to $651/sf. (My townhouse in Arlington was exactly the same square footage, but had only two bedrooms so I’m afraid that three bedrooms must be very tiny. I sold that place for $416/sf.)
Here’s the surprising part: even though I paid significantly less for my house on the next street — more than $100,000 less — I paid far more per square foot: $674/sf, to be exact.
Like anything broken down into smaller chunks, the higher-priced house is easier to digest: more space, more bedrooms, smaller price. Until you add the chunks together. Like buying something for three easy payments of $49.99 until you realize that you’ve bought a $90 appliance for $150.