What is the correct method to compute the price per square foot for a house?

The correct method to compute the price per square foot for a house is achieved by dividing the sale price by the square footage of the house. This calculation allows for a straightforward understanding of the value of the property relative to its size, which is essential for comparisons with other properties in the market.

The rationale for this method is that price per square foot serves as a practical metric for buyers and sellers to assess property value. As it relates to understanding market conditions, when the sale price is divided by the total square footage of the home, it gives a clear depiction of how much a buyer is paying for each unit of space, which can inform decisions and negotiation strategies.

Other methods presented, such as dividing the replacement cost new less depreciation (RCNLD) by square footage or adding land value to the sale price before dividing, do not directly yield the price per square foot in the context commonly used in market analysis. These methods may apply to other valuation scenarios but do not provide the simple per square foot cost that is usually sought in real estate evaluations.