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
A written, legally enforceable document used to transfer title to real estate, See also quit claim deed; warranty deed. ...
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. ...
Wood sheeting made from gluing together at lest three layers of veneer. The grain is placed at right angles with each adjoining layer's providing additional strength. ...
Increase in the value of property caused by inflation. For example, John buys a home for $150,000. Because of inflation, the home is worth $200,000 five years later. The inflation equity in ...
Precisely the optimum location for a retail business establishment in an urban central business district (CBD). A one-hundred-percent-location normally is a square block or intersection in ...
The Graduate, REALTOR® Institute is a designation given to real estate agents who have completed the curriculum developed as an educational attainment program by the National ...
Just to be clear: an Open house is not when you invite friends over to meet your new house. At least not in the real estate world.When you hear someone talking about an Open House, they ...
Rights, interest, and benefits inherent in the ownership of real estate, as distinguished from personal property ...
Significant elevation of land. Narrow upward strip. Connection of edges between different sloping surfaces. ...
Have a question or comment?
We're here to help.