Definition of "Acquisition cost"
The definition of acquisition cost in real estate is the total cost recorded by a company or individual pertinent to the purchasing of a property. This is the entire amount written down in the books and on tax records, and can be claimed when filing corporate taxes. Acquisition cost differs from gross sales price in that the costs calculated to determine the former come out of the buyer’s end, rather than the seller.
This cost includes the cost of the property, cost of appraisal fees, attorney's fee, commission, credit report, hazard insurance, document preparation fee. Also included are the loan application fee, mortgage insurance application fee, mortgage insurance premium, mortgage taxes, pest inspection, property survey, tax stamps and title insurance.
Examples of acquisition cost in real estate
A relatively new arrival in the local construction market, Regal Construction Co. is growing by leaps and bounds due to a combination of efficient management, innovative construction techniques and skilled laborers. Considering their rapid growth as a company, the firm decides to relocate to a new head office, to be constructed on an undeveloped parcel closer to the regional center of industry.
In searching for a suitable listing, the company must take into consideration all of the factors that contribute to each individual listing’s acquisition cost. Depending on its location, the property may have a higher appraisal cost. If additional capital is required, loan application fees will have to be taken into account.
Furthermore, additional costs may be incurred depending on the specific environment of the tract in question. If the area is infested with insect, reptile or rodent pests, extermination fees will also need to be assessed. Property surveys may be necessary as well, to uncover potential difficulties in construction that may present themselves.
When all the costs immediately relevant to the purchase of the property have been totaled, Regal Construction Co. will have determined the acquisition cost of the property in question.
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Comments for Acquisition Cost
Just purchase a home and want to sell it after living here for about 1 year. Need to know how much we can make on the house without being taxed?
May 30, 2020 13:24:07Hey, Gloria! If you want to determine the value of your home, you need to get in touch with a professional appraiser or find a real estate agent near you that can help evaluate the value of your property. You can go to our directory page linked above and search for an agent either by typing in the Zip code or the area your property is located. Also, if you need help you can contact us via live chat or directly at the following phone number 1-866-495-4953
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Aug 22, 2018 10:42:38As a homeowner or real estate agent?
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suppose I borrow money ,as an investor,to buy a house .Explain to me how I could take an acquisition fee and how the overall sum would be payed back to my private lender
Aug 04, 2018 09:38:13Hello Oya
Aug 06, 2018 09:31:25Thank you for reaching out!
An acquisition fee is a sort of administrative fee that lenders set up for their work arranging the loan. It can be paid as a one-time thing that you pay upfront if you negotiate so - the values typically aren't that big, so it's doable. But it's more common to water down the acquisition fee inside the monthly installments. For instance: instead of paying $800 in one shot, you will include $20 on your monthly payment of $1000, leading to a mortgage of $1020 a month. for 40 months.
Hope we cleared that one for you! Good luck!