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
British thermal unit-a unit of energy associated with the creation of heat. Prior to 1929, it was defined as the amount of heat required to raised the temperature of 1 pound of water 1 ...
A zero lot line is a term in residential real estate that refers to houses that are either very close to or at the edge of the property line. These houses are also called zero lot line ...
People often use the term in their everyday discourse, yet many wonder what the meaning of common law genuinely implies. Common law refers to a system of jurisprudence based on court ...
Same as term industrial park: Usually a fairly large site zoned and planned for the purpose of industrial development and located outside the main residential area of a city. Industrial ...
Visible area that can be readily seen by outside traffic. This is particularly important for a commercial business. ...
A charge based on the asset value of a real estate security portfolio to manage it. For an open-end mutual fond, the management charge is included in the selling cost of the security. ...
Property deriving at least 75% of the income from personal residences. ...
A situation where a real estate company spends more money than it receives within a stated period of time. This is an unfavorable situation that may result in financial difficulties. A ...
A report required by the Interstate Land Sale Act for the sale of subdivisions having 50 or more lots. It is filed with the Federal Department of Housing and urban Development's Office of ...
Have a question or comment?
We're here to help.