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
Used to indicate what is included in a monthly payment on rental property. If the payment includes only principal and interest, property taxes, and hazard insurance would make the total ...
Changes occurring in neighborhoods over time. The neighborhood life cycle includes the phases of birth, early growth, maturity, and decline. Not all neighborhoods pass through them more ...
Land expansion resembling a star. The starts center is the city, and major thoroughfares going away from the city are depicted. ...
The term statute is a written law that is adopted by a legislative body from the country, federal, state, county, or city level. The statute definition can be a legislative written decree ...
Regulatory rules that have to be followed by the organization in conducting its activities. ...
Across the globe, countries have comprehensive antitrust laws that protect customers and ensure the orderly conduct of businesses. Through antitrust laws, the playing field is balanced for ...
As the term “servient” comes from the root word “serve” and to serve means to perform a duty or a service for another entity, its meaning is easy to define. The term ...
The right to recover property taken away by foreclosure by paying the lender the total amount owed plus foreclosure costs. The right of a debtor in bankruptcy to recover personal ...
Fence constructed at the property line or other division point separating a subdivision or a home site. It marks the point of separation between two separate properties. ...
Have a question or comment?
We're here to help.