Book Value

Definition of "Book value"

Written by

Marianne Sipple

Weichert, Realtors - McLean

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!