Cost, Price and Value
- Topics:
- Appraisal
- Source:
- Chet Boddy
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Overview: Cost, Price and Value – one uses the words interchangeably in normal conversation, but in the real estate world they have distinct meanings. The words have more specific meanings when linked with descriptive modifiers, such as construction cost, sold price and market value. Cost refers to production rather than exchange. Construction Cost is the cost to build or remodel something. Development Cost is more comprehensive and includes the cost of the land, construction and the profit the developer requires to bring the project into being. The Sold Price is what someone actually paid for a property. This is usually the best indication of value, but not always. For any number of reasons buyers may pay more or less for a property than it’s theoretical market value. The buyer or seller may be uninformed. Unlike cost and price, value is always expressed as an opinion or estimate rather than a material fact. Value is more accurately described as a range rather than a precise number. The process of estimating introduces an initial margin of error.
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Format: HTML | Date: Jan 2003 | Pages: 1
