Price vs. Cost of Housing: What’s The Difference?

The terms cost and price are frequently used in the Toronto real estate market , but are these words the same? The fact is they may seem similar, but they have completely different meanings. Here we are going to explain the two terms of “price” and “cost” in the real estate market to you.

Literary definition

When you look for these words in dictionary, the general literary definition would be:

• Price is the sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale.
• Cost is the amount of money that the buyer should pay to acquire, produce, accomplish, or maintain anything.

However, their meaning in real estate market is more specified, which means their special meaning about housing would be:

• Price: The amount of money the buyer has to pay to buy a property from someone, the owner.
• Cost: The total amount of money that the buyer pays or will have to pay for a property, which generally includes the price of property plus the taxes, the mortgage, the insurance and even the future maintenance expenses. Or it typically refers to all the expenses incurred in relation to building works.

So, as you can see, the cost includes the price of property, and also includes the lifetime expenses of using that property or living in it.

Related articles: How to price your house for sale in Toronto

Thorough explanation in real estate market

Let’s explain the terms with some examples to make it easier to understand. Consider the fact that you may afford to pay the purchase price of a house, but you should also consider whether you can afford the ongoing costs of a big house or not? You must consider the house price plus the routine upkeep and maintenance expenses, even the energy bills which will cost a fortune depending on the size of your home.

Or when you buy a resale house in Toronto, you need to consider all the probable renovations costs including a new roof, replacing wood flooring, and even landscaping. Many of these costs, like replacing wood flooring, completely depend on the size of property.

Buying a big house is not just about paying for house price, it is about maintaining the back and front yard, the pool, and paying your house bills. So, remember that the price tag is just the primary cost, you should consider all the annual costs of your future house or condo before buying. For example, running and maintaining a pool can cost you hundreds of dollars each month in the summer.

Related articles: How much does it cost to buy a condo apartment in Toronto?

In other words, the price is basically the amount that the seller wants from you in exchange for buying the property. If you have noticed when viewing home listings, you will see that the price may be more or less than the actual cost due to market conditions. For example, in the seller’s market, multiple buyers compete to buy a home, which ultimately leads to a higher overall cost. However in the buyer’s market, the final price of the property will be negotiated down from the original list price.

Final words

Before starting the process of purchasing a property, after getting pre-approval and selecting your dream house, it’s essential to consider both the price and costs of the selected home. Always keep your eyes on the long-term costs to make a truly wise decision and the best profitable choice and to avoid future financial risks. Besides, a professional Toronto realtor can always help you with determining the home’s purchase price, and also calculating the probable costs of ownership.