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
A public area, or plaza with a series of walkways permitting pedestrians easy access to shops, stores and restaurants. Modern malls are often enclosed enabling all weather access. Malls are ...
In land surveying, the point al which two properties intersect constituting a boundary line between the properties. A corner can be determined by either a survey or general agreement ...
Those parts of a condominium that are owned by all the unit owners. ...
A passive house is a construction that has limited to zero carbon footprint. These kinds of houses have been developed as an answer for the necessity to lower pollution for the benefit of ...
The right to demand that title be conveyed upon payment of the purchase price. ...
Right to select something or perform some act. An example is a renter of property that is given the option to buy the home at the end of the rental period or to renew the lease. Not ...
Covering on the top exterior of a window. ...
Group of investors pooling their money to purchase real estate. ...
Real property located in an excellent area for its designated objective. An example is a restaurant situated near office buildings, on the main boulevard, so it is easy to see, and has ...
Have a question or comment?
We're here to help.