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
What Is a Real Estate Bubble? One definition for a real estate bubble is the fast increase in prices, usually driven by investors and speculators in major urban areas. Properties are ...
The accelerated depreciation definition is a type of depreciation that makes it possible for a homeowner or real estate investor to depreciate their property faster than the straight-line ...
Opening so that air or gas may enter or leave. For example, an air conditioner has a "vent open" or "vent closed" knob for outside air. The "vent close" switch must be on for air ...
City apartment building that is overcrowded, poorly constructed or maintained, and generally part of a slum. In law, a tenement also refers to possessions of an individual that are ...
Agreement between two or more individuals whereby each party agrees to do or not to do some act. The parties have reciprocal obligations of performance or actions. ...
Provision in a written agreement that depends on the occurrence of something else. ...
Angle from north or south of a property. When a real estate appraiser does surveying, it is looked at clockwise from north. It may assist in determining the form or boundaries of land. ...
One who receives real property under a will. ...
Having the intellect to comprehend the terms and conditions of a will and their impact. A testator must understand his or her estate and its eventual disposition and effects in order to ...
Have a question or comment?
We're here to help.