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
Individual who attempts to maximize his or her profitability by investing which the anticipation that a particular investment will go up in value. A speculator will generally be willing to ...
Large room at the entrance to a building designed for people to converse or move about freely. ...
The willingness of a lender to give a mortgage to a mortgagor. A mortgage commitment will give a time period the mortgage will be given and an indication of the interest rate to be charged ...
Also called "Grey Shell, "Bare Shell," and "Artic Shell," a Cold Shell could be described as the more radical version of a Vanilla Shell. So, what does precisely the Cold Shell definition ...
Written statements about a person or business that are malicious, unfounded, and damaging. It is the basis for legal action. ...
When we discuss loans, it is essential to know that there can be many types of loans and there also are open-end loans and closed-end loans. In regards to closed-end loans, these often work ...
Monthly fixed rental payment. ...
(1) Occupancy rate at which rental income of a property pays for operating expenses and debt service, leaving no residual cash flow. (2) The level of sales of a real estate business where ...
Selling price for a property less assumed mortgages by the buyer. For tax purposes, the computation of the contract price is critical. ...
Have a question or comment?
We're here to help.