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
Amount of money that must be charged or invested in the initial stage of a business transaction to demonstrate good faith as well as to help offset some expenses. For example, the customary ...
A clause that may be inserted in a listing agreement stating no commission will be paid to the broker until the property title has actually been transferred. Normally, willing and able ...
Inventory that is marketed and sold by an entity. ...
Group of rental occupants acting together. ...
The method for splitting a commission between a registered real estate sales person and the sponsoring real estate broker, and between the listing broker and the selling broker, or any ...
A life estate right of a widow on the demise of her husband, if he dies intestate, to all his lands and possessions for her and her children's support. If she dissents from his will, the ...
System of interconnected pipes, radiators, and/or ducts designed to heat a building utilizing a main heating unit. The system is controlled through a thermostat that regulates the ...
Upgrading made by a lessee to leased property. Examples are paneling and wallpapering. These improvements revert to the lessor at the expiration of the lease term. As improvement costs are ...
The economic indicators that trail behind aggregate economic activity. Six lagging indicators issued by the government consisting of unemployment rate, corporate expenditures, labor cost ...
Have a question or comment?
We're here to help.