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Whether you are planning to buy or sell a property it is important to become familiar with the terminology of real estate. In real estate the three terms that are commonly used interchangeably are value, cost, and price. Although, all are concepts relating to value, they are not the same. Let’s begin by differentiating between the terms.
Value deals with something that will happen in the future; whereas cost relates to past events, and the amount of money actually paid for the property is the price. Depending on circumstances, the value of a property may be the same, more than, or even less than the price. Several things determine the value of a property: the degree at which it satisfies a need, ratio of supply to demand, transferability, and whether a perspective buyer with need for the property can financially afford the property.
Value is a term, which should be used when speaking of what you think the future benefits will be from the ownership of a particular property. There are several questions that might be asked when trying to assess the value of a property:
1. What is the zoning code? What’s the possibility of it changing in the next 10 years?
2. If the zoning changes, would it impact the use of the property?
3. What are the plans for the surrounding area (a highway, shopping center, amusement |
