market value

Determining Market Value of Wine Country Properties

market value

Why Using Price Per Square Foot to Determine Market Value of Wine Country Properties is an Inaccurate Metric

More often than not, the reason properties languish on the market is because sellers are provided with a market value analysis based on price per square foot of sold properties that could be considered comparable sales, and that’s the number they key off in determining a List price for their home.

Click this link and/or see below to view a report from MLS showing the price per square foot for the only 6 residential properties that have ever sold for $11m or over in the history of Napa Valley. You will note that the calculation to determine price per square foot is the sale price of the property divided by the square footage of JUST the main home. A few examples from the report:

870 Meadowood Lane, St. Helena:
$15,000,000 divided by 11,731 sf = $1,278.66 psf

20 Campbell Creek, Oakville:
$13,500,000 divided by 11,753 sf = $1,148.64 psf

7820 Silverado Trail, Oakville:
$11,000,000 divided by 9,021 sf = $1,219.38

The problem is, when you deconstruct all of these sales and appropriate a market value for each building parcel, which is determined by location, setting, views, access, infrastructure, and then a value for the various improvements or inclusions that each property might have such as main home, guest house, second dwelling – all determined by quality of finishes and age, art studio, pool, tennis court, landscaping, ponds, vineyards, furniture, art, trademark and inventory etc., the price per square foot undergoes a dramatic reduction and the real price per square foot is revealed.

The one acre building envelope that each parcel inherently has can have substantial variations in market value to neighboring parcels. The same can be said for all the characteristics and improvements of each property, not to mention the condition of neighboring properties.

To give you a couple of examples of how Appraisers determine market value, I have deconstructed a couple of the high end sales that I know intimately:

870 Meadowood Lane, St. Helena. It was the highest residential sale in the history of Napa Valley. I represented the buyer in the transaction.

Land & Building Envelope = $6,000,000
Main Home 11,700 sf x $600 psf = $7,020,000
Landscaping, Pool & Spa = $1,000,000
Guest House 1,000 sf x $400 psf = $400,000
Granny Unit 800 sf x $250 psf = $200,000
.5 acre Vineyard = $150,000
Solar & Furniture = $230,000

Sale Price = $15,000,000

market value20 Campbell Creek, Oakville. I co-represented both the seller and the buyer of when it first traded in 2007 for $13,950,000. It was the second highest sale in the history of Napa Valley. That sale price included over $2m of furniture and art but agents pulling numbers on price per square would not know that. When it re-traded in 2013 for $13,500,000 it did not include furniture or art. Given that I know the property intimately and am very familiar with the comps, I believe the deconstruction of the sale price would look like this:

Land & Building Envelope = $4,500,000
Main Home 11,750 sf x 500 psf = $5,875,000
Caretaker’s House 1,200 sf x $250 psf = $300,000
Guest House 1,000 sf x $300 psf = $300,000
Children’s Theatre Building 1,000 sf x 200 pfs = $200,000
Vineyard 3 acres @ $275,000 per acre = $825,000
Landscaping = $1,000,000
Tennis & Bocce Courts, Pool, Outdoor Kitchen, Pizza Oven = $500,000

Sale Price = $13,500,000

7820 Silverado Trail, Oakville had a large guest house, a huge workout center, a wine tasting room, 3 acres of premium Cabernet vineyards and the sale price included $2m for the seller’s trademark and inventory.

Thus, when someone tells you that homes of your quality or in your area are selling for x number of dollars per square foot, make sure to ask the for the data and details to back it up and do your own deconstruction of those sales with all the facts.

If you want to know what the real market value of your Napa Valley property is, please contact me. I have a reputation for bringing in buyers years after sellers list their properties with other agents for prices way over what I told them their property’s market value was when they interviewed me for the listing. I also have some extraordinary off market inventory, and each and every property has spectacular views. I’m looking forward to sharing my insider knowledge with you. You can reach me at [email protected] or (707) 738-4820.

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