Replacement Cost
Definition of "Replacement cost"
Are you thinking to yourself: What does replacement cost mean?
When someone in the Real Estate Market mentions Replacement Cost, they are talking about an evaluation of how much it would cost to build a completely identical new house to replace an old one. By completely identical, read as built with the same materials (or materials of equal quality), the same square footage and the same amount of bedrooms, bathrooms and whatever other types of rooms the preexisting house had. Included in this calculation is also the manpower required to build the new house on the place of the old one.
Why is this done? Well, determining the replacement value of an asset is mostly done for insurance reasons – like calculating the depreciation of the house over its useful life to cover any damage – but the so-called replacement cost approach can also be done by an Appraiser in order to help assert the Market Value of a house in volatile markets where the real estate market external factors are difficult to evaluate.
Real Estate Secrets:
Building a new house to replace the old one? There are a bunch of other terms you should look on our Glossary to guide you through this tiring process!
You know a difficult replacement cost to calculate? That of a trustworthy agent! Use The OFFICIAL Real Estate Directory® to find one!
Popular Real Estate Terms
The substitution of one person or business for another when the substituted person or business has the same rights and obligations as the original party. An insurance company can surogate ...
(1) Methods that involve discounting the future cash flows generated by an income property. These techniques are used primarily for valuation. (2) Methods of selecting and ranking ...
Tax-free exchange that allows a seller two years after escrow closes on his former principal personal residence to buy like-kind property and defer taxes. Profits from the sale of a ...
Title granted to those having expertise in valuing homes by the American Institute of Real Estate Appraisers. ...
See historic structure. ...
An interest rate charged on a loan that exceeds the legal maximum interest rate within the state. It is illegal to do so. The maximum interest rate may depend on the type of lender and ...
An interest in property with the right o possession being postponed into the future until a certain even occurs. There are several possibilities where a future interest in property could ...
Highest bid to buy and the lowest offer to sell a parcel of real estate in a particular market at a specified time. ...
Residential or office structure adjacent to water such as a lake. Such property has a higher value because of the greater demand for it. ...
Have a question or comment?
We're here to help.