Property Acquisition Cost
The definition of property acquisition cost in real estate is the total recorded cost of a piece of real estate after reductions in price, incentives, closing costs and any other expenditures have been factored in, barring sales tax. This number is used primarily to denote the true amount paid for fixed assets beyond the initial price of the property.
To better understand the definition of the property acquisition cost, let’s take a look at some examples that demonstrate how exactly property acquisition costs might be calculated in an actual sale.
Examples of the property acquisition cost in real estate
Drumman Construction Co. is a small construction company operating out of a mid sized town in Arizona. Seeking to expand its business, the company begins the process of purchasing a plot of land on which they plan to construct a warehouse and head office. After finding a suitable plot, the process of purchasing can begin.
The plot in question is priced under market value, making its purchase an attractive proposition. In addition to the already low price, the sellers are also offering a significant price reduction due to some unseemly structures on the property, which are of no concern to the construction company.
The buyers begin the process of purchasing the land, and all goes smoothly. After completing all the necessary paperwork, the buyers are ready to move forward with the transfer of ownership. However, before the name on the deed can be changed, a legal issue must be settled regarding the property line between the neighboring plot and the one in question. A lawyer is hired, and the issue is settled.
After the sale is completed, the real estate agent takes their commission and the land is now in the possession of the construction company. The total property acquisition cost in this instance is the sum of the fee paid to the lawyer, the closing costs in relation to the transaction, and the reduction in price as it affects the initial list price. Note that the sales tax is not factored in here.
Popular Real Estate Terms
Freestanding residential housing constructed on its own building lot. Detached housing is the typical type of housing found in suburban developments. ...
Blockbusting is a despicable and illegal racist business practice. Here’s how Blockbusting happens: a real estate agent, or someone posing as one, comes to a homeowner and instills ...
Market price pf all the property prior to a condemnation proceeding. ...
Measures looking at the past , current an future direction of the economy. They may have an impact on the real estate market. Each month government bodies, including the Federal reserve ...
Rating used by lenders and creditors to determine if a credit applicant should be granted credit. It depends on many factors such the applicant's job history, earnings, net worth, etc. Some ...
Reformation in real estate means a legal action to straighten out an erroneous deed, a misleading document, an error, a paragraph, or a contract entirely which resulted from an ...
Claim made by a federal or local government agency against a taxpayer's property for delinquent or overdue taxes. The tax lien is effected through tax assessment, demand, and failure to ...
Building recognized because of its history, such as the Booth theater in Washington, Dc. The demolition of historical buildings is not permitted. Historical building modifications are ...
Divider made of plasterboard or plaster used to partition rooms. A room is created by the walls surrounding it. ...
Have a question or comment?
We're here to help.