Price per square foot is calculated by dividing a home's price by its total finished living area. It offers a quick way to compare the relative value of properties of different sizes within the same area.
While useful, the metric has limits. It does not account for lot size, condition, upgrades, layout quality, or location within a neighborhood, and it can be skewed by how square footage is measured. A larger home often has a lower price per square foot than a smaller one nearby, even in the same market.
Agents use price per square foot as one input among many, not as a standalone valuation. It is most reliable when comparing very similar homes in the same neighborhood.