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
Land development planning model theorizing that an urban area grows in rings expanding out from the central business district. The second ring is a shifting area having manufacturing and ...
A backfill defines the act of replacing a vacant lot. People use a backfill as a replacement for an unoccupied position. Backfill in construction and archaeology! The most common ...
To understand what a principal broker is, we have to go back up the family tree of real estate.You do understand all brokers can be real estate agents, but not every real estate agent can ...
What is a balcony? A balcony is a platform that extends outwards from the upper level of a building, typically attached to a wall or supported by columns. Balconies can be made of various ...
national trade association of people engaged in the mortgage banking business, dedicated to the betterment of the mortgage banking industry through education, legislation, and high ethical ...
Received immediately when an investment is made or contract signed. For example, a real estate limited partnership may require that an investor pay a 3% sale fee at the time of initial ...
Are you looking to sell your house or buy a new one? Then, you'll most assuredly encounter the term instrument at some point. If you don't want to ask people: "Please, define instrument to ...
An installment sale of land whereby the seller accepts a mortgage from the purchaser to complete the conveyance. After the mortgage has been satisfied, the deed is conveyed to the ...
Individual having permission to act ob behalf of a bank or other financial institution in a specified locality to attract interest borrowers. ...
Have a question or comment?
We're here to help.