Why do smaller sqft homes sell for more 4 per sqft?

Answer 1

Don't know for certain, but it is likely the inclusion of things that don't vary in price, just like all other forms of paying more to get less.

There will be costs for filing to change ownership of the place, inspector's fees, possibly a minimum value to the land involved in it. If it's an apartment, any land outside it that has to be tended has a minimum cost to deal with. And, then, of course even if there wasn't all that there's 'market forces', which basically means there's a lot more people who can afford to spend, say, $50/sq ft for 500 sq ft (total 25,000) than people who can afford to pay $45/sq ft for 800 sq ft (total 36,000). Note that those numbers are complete fiction and just there to illustrate the point.