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
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 ...
In business, one may come across the cash accounting method, also known as cash-basis accounting, during the accounting period. The cash method of accounting is used where payments are ...
The net leasable area is all the leasable area of a given building exclusive of non-leasable space such as hallways, building foyers, rooms devoted to heating, air conditioning, elevators, ...
Contains the appliances necessary for the maintenance of an establishment. ...
The phrase used for the period in which the escrow agent communicates to both the buyer and the seller as to what documents or moneys have to be deposited with the escrow agent to satisfy ...
Loss of property value due to external forces of events. ...
(1) The exposed trim and molding surrounding a door or window. (2) Woodwork which encases a pipe or structural member. (3) Method of creating a form for the pouring of concrete. ...
Placed by the federal government on a individual's real property for federal estate tax or income tax law violations. In the case of a federal estate tax lien, upon the owner's death, the ...
Claim made by a federal or local government agency against a taxpayer's property for delinquent or overdue taxes. The tax lien is effected through tax assessment, demand, and failure to ...
Have a question or comment?
We're here to help.