price per square foot is the wrong metric to measure usable square foot

One of my co-workers has been shopping for his first home and therefore doing a lot of research in the area of real estate prices and neighborhood comparisons in the Bay Area. The conversation sparked more co-workers to join in and eventually somebody pulled up a chart that was showing home prices per square foot similar to this one below I created using this Zillow tool.

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Not all square footage is created equally

People generally use price per square foot as a metric in understanding how much real estate purchasing power value i.e. “bang for the buck” they have when it comes to size of the home they can buy. Interestingly San Francisco at $1,073/sq ft is not the most expensive US city per square foot as that designation belongs to Manhattan at $1,361/sq ft. However, this metric of measuring value per square foot can be misleading because people are assuming that all the square footage is created equally. I am sure we have all heard people at an open house saying, “Wow it feels big in here” implying that the listed square footage is small in their minds. People fail to realize that not all livable square footage is usable but is instead wasted. For example, in my south bay house remodel we made the decision to eliminate the hallway in favor of larger bedrooms which equate to better privacy for the renter and willingness to pay higher rent.

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How is square footage measured?

First understand that square footage is classified as either lot or living square footage.

• Lot square footage is defined as the plot of land defined by longitude and latitude coordinates as defined per the land plat map. When purchasing a home there will be paper work that will define your plot of land boundaries that belong to the home hopefully where the fences are built.
• Living square footage is defined as the spaces that you will be spending the most time in such as bedrooms, living room, kitchen, bathroom. Another good way of understanding living square footage is the rooms that are generally temperature controlled for heating or cooling. There are a lot of different interpretations such as ANSI or this answer from a real estate lawyer that I would rather not want to get into a debate over so to each their own.

Snoop Dogg’s man cave is not livable square footage

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Here is where living square footage begins to get hazy. Things like garages, attics, basements, sheds are normally not counted towards the living square footage. That means Snoop Dogg’s man cave shed in the backyard does not count towards the living square footage even though it has a Samsung flat screen TV, Xbox One, and a mini-bar. However things like staircases, closets, hallways, enclosed porch (heated from main home) all count towards living square footage because they are accessible to the main home.

What is usable square foot?

This is where I put on my thinking cap and start to debate things like attached garages or finished attics or basements. Some appraisers will count an attic if accessible by stairs but not basements because below ground level. However, I know in Chicago with my wife’s home that even though her attic is accessible by stairs still does not count because it lacks 2x entrances. So I came up with my own metric called usable square foot because I need to know if there is an attic or man-cave in the garage that I can rent.

To conclude this post I just want to remind readers to think about whether the square footage is usable in any home you purchase. In the bay area, most homes do not have a basement due to earthquakes however there are plenty of homes that have finished attic spaces that would be worth paying higher price per square foot especially if it is a rentable space. Therefore the listing with higher price per square foot might have a hidden usable space like an accessory dwelling unit (ADU) that was not included with the listing for the home but it is a space where you can rent (a portion of) the mortgage.

Let me know in the comments if you agree or disagree with my list of Livable and Usable square footage.