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

- S
- semi-ambivalent
  
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posted
12 years ago

Sun, Sep 11, 2011 5:43 PM

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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- paulthomascpa
  
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posted
12 years ago

Mon, Sep 12, 2011 5:43 PM

"semi-ambivalent" wrote

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.

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- Michael Dobony
  
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posted
12 years ago

Sun, Oct 16, 2011 1:56 PM

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.