To better understand what is asset depreciation, it is helpful to first define it. Asset depreciation simply means the reduction in the market value of an asset over time. So, what exactly does that have to do with selling off your house? Basically, asset depreciation decreases the value of your home as you depreciate it. That being said, let’s examine what things would typically be considered assets and what would be considered liabilities for purposes of using asset depreciation.
Probably the most obvious asset is your home. It would not be surprising to learn that many homeowners consider their homes to be among their most valuable properties. Of course, nobody wants to sell their home and have it sold by someone who does not take the time to inspect it thoroughly. With that being said, a simple inspection of the exterior of the home would reveal the condition of the foundation and other structural aspects. If it appears to be undamaged and structurally sound, it can almost always be sold at a substantial gain.
On the flip side, if the home appears to be a hazard, it may be a good idea to put it on the market. The potential buyer’s appraisal will almost always be lower than what the real estate agent initially estimated. This means that, in many cases, the homeowner actually loses money on the sale. So, how does one deal with asset depreciation when selling a home? First, a smart realtor should have a good working understanding of property depreciation and should advise their clients to sell at the market value instead of trying to sweetheart deals.
In the real estate world, it is extremely difficult to sell a home at a low price. Real Estate depreciation will often reduce the overall value of the asset, making selling at a low price a near impossible feat. What you can do is find a property that is in better condition and that has low levels of home inventory. By purchasing this asset at a lower cost, you can make up for some of the depreciation by making repairs and adding appliances.
Another thing to consider is where to sell your home. If you live in a city that is quickly growing, it may make more sense financially to raise the price of your home and rent it out to new renters. On the other hand, if you want to keep your home and are hoping that you can increase its value in the future, you should probably consider putting it on the open market. It would be wise to hire a realtor that knows what is going on in the home marketplace to find prospective buyers.
There are several things that determine the final value of an asset. One of them is the location of the asset. If your house is located in a desirable part of town, it will obviously cost more to list and sell. Another thing to consider is how much work it will take to renovate the home. The more features you add to the home, such as a large kitchen or a swimming pool, the more expensive it will be to sell. If you plan on living in the home, however, it may not make sense to spend hundreds of thousands of dollars to make improvements.
It is also important to consider how long you plan to live in your home. Even if you are planning to sell it within a year, there could be a significant difference in the value of the home. For instance, if you expect to stay in the home for five years, you should expect it to sell for less than it would if you expected to move out within a few months. Of course, the longer you plan to stay, the more you will have to sell the home for, but it is usually more than half of what it would initially cost to buy the property.
When you have finished creating your asset list, you should go through each item on it to see if it is valuable enough to list as an asset. Most people do not think about what is asset depreciation, but it can be one of the best ways of saving money when selling a home. If you do not like the idea of selling everything, you can create a list of special items and keep them handy.