Price per square foot
A reader asked me to comment on this method of valuing a house and I'm happy to do so. When I went house hunting in Boulder CO a few years ago I discovered (a) that land use laws have driven prices way above even Greenwich and (b) new houses are sold by the square foot. My Realtor showed me various developments on the plains (the hills of Boulder itself are long since built out) and described them as "$200 per square ft. houses", or "$400 psf houses". and so on. Worked for me, but here in Greenwich, it's not so easy.
Some of the problems with using the method here are the variables. A house north of the Post Road in Riverside or Old Greenwich will obviously not command the same price as one south of that road, so the land value will be less, the builder, if he's smart, won't put the same finishes into the house, etc. Still, withing a discrete neighborhood, and adjusting for precise location, it's not a bad tool. But watch out for builders' calculations of square footage, because some add the basement to that measurement while others do not. Finished or not, a basement just isn't worth the same as finished space above grade. I work with a client, Greenwich Construction Company (just in the way of full disclosure here) who never includes the basement space in the square footage calculation. They (and I - remember the above disclosure) sold 4 new houses in Riverside last year for between $635 and $675 psf. That's up quite a bit from a few years ago, when I did a survey of new homes sold in Riverside and found an average price of $565. Unsold new houses at that time averaged $665 and never did sell until they dropped below $600. We've seen some big increases in land and building material costs since then, so that probably accounts for the jump.

It's tougher to use this method on existing houses but, with the possible exception of Conyer's farm or high end direct waterfront like Meade Point or Field Point Circle, any house asking more than $1,000 psf is usually doomed to sit for a long, long time. This is not a widely-known fact, judging from some of the prices I see out there.

Any builder knows his numbers and they all use pretty much the same figures. Land is "X", and varies with location and size, but basic constrution costs are about the same - the huge differences come when finishes are selected. Buyers all want granite counter tops (why?), Sub-zero appliances why again?) and so forth, but add a mahagonny panelled library and such and you start piling up the money. Your choice of either a slate,cedar or asphalt shingle roof can easily make a $100,000 difference, and that's before you've added those copper gutters and downspouts.

All that said, it is indeed possible, and not at all foolish, to take a selection of comparable houses, divide their square footage by their asking price and see which is the better value. So long as you make certain you're not including one building's basement and not the other's, you'll end up with a useful gauge. Of course, it helps if you like the house, too.