You can throw the blame on the value of the improvements made on that house if you managed to find just the right house for you, but you could not afford it. Any improvements made on a piece of land increase the value of that property in the market.
Additions like construction of any building or structure, painting the building, creating a garden or even furnishing the building etc. increase the total market value of the building and are called the value of improvements. When the value of improvements is added to the value of the land without its improvements, it is called the improved value of the property. If any property is divided into two parts - the first being the land and the other being any addition made on that piece of land. In that case, the improved value would be the aggregate value of that piece of land after making any accessible improvements to it.
When it comes to assessing the value of any property or piece of land, there are three important values associated with it. Determining every value on that property is important for tax assessment. The three values are Land Value, Capital Value and the Value of the improvements.
The capital value is the market price of the property. The price at which it would likely be sold.
Land Value is the value of the bare land if there was no construction made on it.
The improvements made on a piece of land are not the sole reason for the changes in the value of a property.
The value is also affected by the surroundings of the property, its connectivity to the other areas, markets nearby, drainage facilities in the area, the landscape of the area and a lot more.
The improvement ratio is the difference between the purchase price of the property and the land value, cost of building and its improvements.
The higher the improvement ratio, the higher would be the annual depreciation of the property. This in return can come in handy when filing the taxes, as it would increase the depreciation expense of a commercial property.
Improvement ratio is determined for a commercial real estate property as it is needed at the time of tax assessment.
The improvement ratio can never be 100% as the land would always hold some value, likely to be fixed.
