"Cost" often refers to the cost of building a property. This includes all the construction works and installation of services, the expense of paying architects and engineers' fees, etc. We must be careful here as costs quoted for building a property may or may not have the cost of land factored into them.
Of course there are costs associated with putting a property on the market, e.g. the Home Report, estate agency and legal fees. Sellers also have the expense of hiring a removal company and other associated expenditure.
First and foremost, the "price" of a property (what I call the "upset") is the asking price for that property. This is the guide price that an estate agent puts on a property to generate interest and achieve an acceptable offer. Once an acceptable offer has been received, the price becomes the "agreed price".
The "value" of the property is the figure placed on the property in the Home Report by a RICS-registered valuer. Technically, it is the "market value" of a property. This is defined by the Royal Institution of Chartered Surveyors as "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion". It is therefore a theoretical figure and a matter of professional opinion and calculation rather than fact.
"Worth" brings in the concept of personal purpose and emotion. What something may be worth to one client may not be the same as another. For example, buy-to-let investors will carefully calculate the costs involved in a purchase, the potential yields and capital growth, and will have an optimum figure which the property is worth to them.
On the other hand, a client may have a specific interest in a property, possibly because it is close to their relatives or to an amenity which suits their specific purposes. There may be an element of nostalgia for a particular street or area involved. As such, that client may be prepared to pay a premium as the property is worth significantly more to them than it may be to others.
For those requiring a mortgage any offer will be restricted by their loan-to-value borrowing and the extent of their deposit savings. If the client is self-financing potentially no such restriction will exist. In a system of blind bidding at a competitive closing date, the pressure is on. However, it is very unlikely a client will ever find out how much of a premium they paid on their successful offer.
We often see the emotional aspects of property buying in our work when people with an emotional buy-in are prepared to push their offer to the maximum. This is the unknowable side of the property market where big wins are possible for a seller. These are hard to predict and clients must be constantly reminded by their advisors that any premium may be lost at the time of re-sale.
The reinstatement costs are the costs of rebuilding the property in the event of damage or total destruction - basically the same as our definition of "cost" above. It should be noted that this figure is based on a direct like-for-like replacement both in style and construction. This may result in a relatively high figure as it does not allow for the use of modern materials. The like-for-like basis arises from the possibility that the property may only be partially damaged. Reinstatement costs are provided in the Home Report to assist in arranging property insurance.
We need to be clear when we use terminology to do with value in the property world, as each word has quite a specific meaning. A further complication is that the actual figures are not necessarily related. Ultimately, the price paid will be based on location, supply and demand and on what individuals in the market believe the property is worth, although this figure may also be influenced by the market value and reinstatement costs of the property.
It is always worth getting the professionals' advice on the value of any property going to the market. When putting in an offer, it is worth keeping in mind that if you pay more than the going rate, that price may not be obtainable when you resell. That said, I usually find that clients are happy when they get the property they want - something that you can't put a price on.