Is Your Home an ‘Asset’ or a ‘Liability?’

How to know the difference and realize the true value of your home

It’s an Asset if You Can Sell It for Cash

Your home is, indeed, an asset for several reasons. First of all, you can sell the house whenever you choose and put cash in your pocket at closing. (Obviously this assumes that you sell your house for more than you paid for it. Admittedly, that’s not always possible consider about 25% of homeowners are underwater – or owe more on their mortgages than the homes are currently worth).

In any event, whenever a homeowner is able to sell a home for more than the mortgage balance, those are real dollars, not phantom profits.

The fact you’ll likely pay a real estate commission on the sale doesn’t diminish your home’s status as an asset, just like paying a commission to a stockbroker when you sell a mutual fund doesn’t negate that fund’s standing as an asset.

By the same token, it might take you one month or even six months to sell your house, whereas unloading the furniture in your house could be done in one day, at a garage sale. In both cases, a sale is a sale and you’re still making money off the assets that buyers agree to purchase.

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  • D Crosby

    Sounds good as long as you gloss over the fact that in 2011 your home is likely to be underwater or showing very little equity. Also selling your home in one to six months is unlikely in many areas meaning you are either shackled physically to your house or paying for two while waiting for a sale.

    Furthermore, and most importantly, you made absolutely no mention whatsoever regarding maintainance. The cost of a new roof, driveway, water heater, furnace and untold (minor) repairs over time have to be factored into the equation.

    As a business magazine you should also be advising your readers about opportunity costs, ie the money you could have earned selling you skills rather than spending your weekend fixing and maintaining your home.