What do I do with an (unknown) increase in home value?


S

semi-ambivalent

Hi all, got a newbie's question.

Let's say I value my house at $100.00 in my accounting software (as an
opening balance). We have just completed some renovations that
certainly increased its value, and, even in this market, its sellable
price. The cost of the renovations are tracked as expenses but where
would the estimated increase in 'sale value' go? Just to balance the
transaction I've place the increase in a Balance Adjustment account
but shouldn't it really go as an Equity amount which I could adjust to
reality once the house is sold? I base the 'value' of the house on a
number the mortgage holder says it's worth; however inaccurate that
might be :)

thx!

s-a
 
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P

paulthomascpa

semi-ambivalent said:
Hi all, got a newbie's question.

Let's say I value my house at $100.00 in my accounting software (as an
opening balance). We have just completed some renovations that
certainly increased its value, and, even in this market, its sellable
price. The cost of the renovations are tracked as expenses but where
would the estimated increase in 'sale value' go? Just to balance the
transaction I've place the increase in a Balance Adjustment account
but shouldn't it really go as an Equity amount which I could adjust to
reality once the house is sold? I base the 'value' of the house on a
number the mortgage holder says it's worth; however inaccurate that
might be :)

Your renovation costs are not "expenses" but are part of what adds to your
increased value, so book them to the house to increase your cost basis.

If you are tracking the change in value, then book that change to a
"unrealized market value of house", which would be a contra asset account
and a corresponding entry to a similarly titled income or expense account.
 
M

Michael Dobony

Your renovation costs are not "expenses" but are part of what adds to your
increased value, so book them to the house to increase your cost basis.

If you are tracking the change in value, then book that change to a
"unrealized market value of house", which would be a contra asset account
and a corresponding entry to a similarly titled income or expense account.
Value (basis) is what you paid for it. This value does not include
interest. If this is personal property you add major
improvements/renovations to that value. If it is a repair then it is an
expense. Personal property does not get depreciated. If it is rental
property the renovation is recorded separately and depreciated separately.
Again, this is for renovation, not repairs.
 
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Value (basis) is what you compensated for it. This value does not include interest. If this is individual residence you add major improvements/renovations to that value. If it is a fix then it is an expense. Personal residence does not get decreased. If it is rental property the remodeling is documented independently and decreased independently.Again, this is for remodeling, not maintenance.
 

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