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
Generally, the definition of a deposition means a pre-trial and out-of-court testimony that is given under oath. A deposition is integral to the discovery process to establish a ...
Map within a governmental jurisdiction showing the boundary lines and ownership of all real property. A cadastral program produces the cadastral map. ...
The minimum age required for legal competency ( in most states 18 years). ...
Act occurring after the fact. ...
Local government ordinances governing real estate development including structural and design aspects. Zoning ordinances usually define various usage classifications ranging from ...
Predetermined price for a contract that will be the same irrespective of the actual costs incurred to complete it. This contract is advantageous to the buyer because he knows beforehand ...
Title that can be made null and void or defeated upon the satisfaction of a claim or the completion of some future contingency. ...
The value of property subject to tax. The tax equals the tax rate multiplied by the property's value. ...
Distance from the location of natural ground and water to the actual ground level. ...
Have a question or comment?
We're here to help.