Definition of "Book value"

Book value is a quintessential term used in the financial world and the real estate business. Though, there are slight differences in its interpretation in these two areas of expertise.

Book value in finance

You’ll find the most common use of the term ‘book value’ in insurance. Generally, specialists calculate book value based on depreciable property assets. Depreciable personal properties and goods have long-term value, such as buildings, equipment, and furniture. Accountants would call a firm’s assets book values from inventory, stocks, and even markers and staples employees use.

Typically, more lasting assets, for instance, money and real estate, don’t need to be considered when estimating the book value. These are not susceptible to devaluation.

Book value in real estate

Let’s suppose you once purchased a property. In this case, the book value coincides with the real estate’s original price. Now, if you wish to sell it, its value may have changed in the meantime. So, the resale value depends on your area’s current real estate trends. You won’t find its current value until you sell it or have a home appraisal

Book value vs. market value

In other words, book value defines a property’s net worth as shown on the balance sheet or statement of net worth until the final sale takes place. Besides, a real estate’s book value equals the gross cost less accumulated depreciation. Let’s remind you: the book value has been established based on a property’s historical worth, and it differs from its actual market value! What house buyers are willing to pay determines your home’s market value in the present.

Turn to an expert!

To find out more about your house’s book value, you can turn to an appraiser to provide you with a home appraisal. Also, contact a real estate agent to obtain an expert’s advice. They will offer you a recommendation on a private property’s value. Thus, you can discover whether it’s worth renting, buying, or selling a place under the current housing market circumstances!

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Taken out on property to replace or repair it if it malfunctions. It covers parts and/or service. An example is a warranty a homeowner takes out on a stove, refrigerator, or dishwasher. It ...

Same as term trust; An agreement in which the trustee takes title of the property ( called corpus) owned by the grantor (donor) to protect or conserve it for either the grantor or the ...

Geographic area that is attractive to prospective tenants. Square footage in an office building or apartment house that may be rented by a tenant. ...

City apartment building that is overcrowded, poorly constructed or maintained, and generally part of a slum. In law, a tenement also refers to possessions of an individual that are ...

(1) Written statement by a responsible individual or entity of the correctness and reliability of something. (2) Written permission to do something, such as receiving a real estate ...

If you’re an owner of a property that needs to be accounted for in your return on investment or used to calculate your capital gains and losses, then the cost basis will help you ...

Land and any existing tenements that are part of a conveyance. For example, upon closing a real estate sale. The seller deeds the premises to the purchaser. ...

The accelerated cost recovery system is a depreciation system for tax purposes mandated by the Economic Recovery Tax Act of 1981. In 1986 the Accelerated Cost Recovery System (ACRS) was ...

Number of small holes in a wall allowing water to drain from it. This makes the walls able to withstand water pressure. ...

Popular Real Estate Questions