Price vs. Value - Terminology Matters

Okay... today we switch gears a little bit and discuss two terms that many mistakenly use interchangeably. When discussing a home with a potential buyer or you're looking to secure a listing from a seller, it is important to understand the difference between the words that we choose to use. Price and Value are two words that agents often confuse.

Price - the listed or advertised cost of something.

Value - the underlying worth of something.

If we look at these terms and their specific connotations we begin to understand the difference. A price is static and impersonal. The value is personal and definable.

Someone's home, whether buying or selling, is very personal.

Therefore we start with value to determine the final price. Ultimately this is where agents begin to make the mistake. They neglect the term "value" and use the term "price" throughout their presentation. In doing so the client is conditioned to assume the price and value are one in the same. Separating these terms in your initial presentation will not only separate you from other agents that do not make this distinction; it preps your client for the negotiation stage while ensuring their expectations are realistic.

For example if a seller insisted their home's value was 500,000 dollars, when the market supported prices of 400,000. It would be safe to say these particular clients are not realistic in their expectations. Even if you do successfully take the listing, and sell the home for 450,000 dollars, they will deep down, still be a little spiteful... and although this is not any fault of yours, it is your fault they didn't get the 500,000 they thought their home was worth.

Here's another example... a couple thinks their home's value is 500,000, while the market supports a sale price of 600,000. Setting the list price at 620,000 and negotiating down to 590,000 for a final sales price is still going to produce a happy seller. You just sold their home for 90,000 dollars more than they thought it was worth.

Use these terms to your advantage... when used correctly they are excellent qualifiers, they will separate you from other agents that are not as thorough in their analysis and market representation, and you setting realistic expectations for your clients.

After all the home's "value" is what it is worth... the "price" is a subjective number based on a marketing strategy.