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
Also called a rollover mortgage. Provides a borrower with a fixed-rate mortgage that expires at a preestablished time, such as in four years. This permits the lender and borrower to ...
Business that transforms an underdeveloped tract of land into plots ready for construction. ...
The definition of front foot is a person or an entity that has an advantage or has the initiative. It could also be used to suggest that someone is taking an offensive position. Based on ...
The term accusation refers to a declaration made by an individual about another individual or entity having behaved in an immoral, improper, or wrong manner. The two parts of an accusation ...
Large scale map of an urban area detailing land use. City plans are essential for projecting the growth, development, and redevelopment of the urban area. The major objective of a city plan ...
The definition of obligee is the person to whom a debt or obligation is owed. An obligee is one party of a contract to who the other party, the obligor, is obligated. An obligee is also the ...
Notice sent from a plaintiff to a defendant requiring the defendant to appear before a court or judge. For example, a landlord might send a summons to a tenant regarding a notice of ...
Principle stating that all joint tenants must acquire their interest from the same deed or will. ...
Insulation covered on each side by a material, such as metal. ...
Have a question or comment?
We're here to help.