Too many times the terms price, cost and value are used interchangeably. In real estate appraisal each has a specific definition that differentiates it from the others.
Price: Refers to either the asking or selling price that was actually requested or offered for a property, presently or in the near past. Price represent's a person's individual assessment of value NOT the broader, more objective, non-personal assessment that appraiser's strive for.
Cost: The actual dollar amount paid for a property in the past or dollar amount needed to build or improve a property at a specific time. Cost may or may notbe equal to the market value of the improvement depending onmarket conditions, which may inflate or depress rents, vacancies, interest rates, etc.
Value: Traditionally defined as the power of a good to command other goods or services when exchanged in the market place. There are several types of value that will be discussed in more detail in an upcoming blog entry.
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