In the cost approach, what is replacement cost?
Correct Answer
A) The current cost to build a substitute improvement with equivalent utility using modern materials and standards
A replacement cost estimate asks what it would cost today to build a substitute improvement that offers the same utility as the subject, using current materials, standards, and design. It does not require the appraiser to duplicate every outdated feature or deficiency in the original structure.
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More Valuation Market Analysis Questions
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- → An appraiser is using the income approach to value a 12-unit rental building in Brooklyn. The building generates $180,000 in annual gross rental income. Operating expenses total $54,000 annually. The appraiser determines that a 7.5% capitalization rate is appropriate for this type of property in this location. What is the indicated value using the income approach?
- → An example of functional obsolescence is:
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While preparing a CMA, Leo sees that similar homes closed between $495,000 and $505,000, but a nearly identical active listing at $519,000 has sat on the market for 45 days with little activity. How should Leo use that active listing most appropriately?
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In May 2026, Appraiser Lena is valuing a custom home that was completed last month in Aspen Ridge, an area with very few comparable sales. Which approach is often especially useful as support in this situation?