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
One of the many Inflation definitions can be put into these simple words: the result of the general increase in prices over a period expressed as a percentage. Inflation is controlled by ...
Method of construction where part of the structure is supported by a cantilever beam or truss. ...
Equals the tax divided by taxable income. Foe example, if the tax is $30,000 on taxable income of $120,000 the effective tax rate if the business is 25% ($30,000/$120,000) ...
Method of selling and obtains possession, but the seller retains the title. ...
Writ issued by a superior court to a lower court requiring the latter to produce a record of the proceedings of a particular case. The purpose of a writ of certiorari is to review the ...
Land that has poor income potential, usually used in an agricultural sense meaning that the land is untellable, has poor access, is extremely steep, has suffered serious erosion, is ...
Drilled well where water rises through the opening because of naturally occurring water pressure. ...
An opening that lets the outside air come in or out of a structure. A ventilation fan lets the structure have access to outside air when the switch is in open position. ...
Reference to let the vendor beware. Without specific exemptions, the vendor is obligated for action by the buyer for any explicit or implied modifications in the contract or warranty. ...
Have a question or comment?
We're here to help.