Difference Between Cost, Price and Value

Published by julia | Filed under Buyer / Seller Tips, Market Trends, Miscellaneous, Real Estate, Shout Outs

The amount of money we spend on an item is the cost, price and value, right?  In the world of real estate cost, price and value are three very different terms.  Do you know the real estate difference between cost, price and value?

Cost in Real Estate

The cost of a home in the real estate world refers to the amount of money spent on building the home.  This can also be referred to as the construction cost or the development cost.  When dealing with a home builder the cost may also refer to the estimated amount of money needed to build a home.

Price in Real Estate

The price of a home in real estate refers to the amount of money spent on a piece of property.  While the price of a home may be indicative of the value in some cases, this is not always the case.  In markets where compareable sales drive the price of a home down, the value will waver as will the price.  However, in some cases home buyers are willing to spend more than the value of a home if they have fallen in love with a piece of property. Thus, driving up the price.

Value in Real Estate

The value of a home in real estate is truly just an estimate.  The estimated value of a home based upon compareable sales in an area will cause that value to move up or down.  When a home’s value is established, the sales price of homes in that area will weigh heavily on the value of the home.

In real estate the three words cost, price and value refer to three different amounts of money.