Florida Real Estate Broker ExaminationValuation and Market AnalysisEasy
An appraiser is using the cost approach to value a newly constructed warehouse. The appraiser determines the cost to build a replica of the warehouse using current materials and construction standards. This method of estimating construction cost is known as:
- AComparative-unit method
- BUnit-in-place method
- CReplacement cost new
- DQuantity survey method
Show answer & explanationAnswer & explanation
Correct answer: C. Replacement cost new
Replacement cost new is the cost to construct a building with the same utility as the subject property, using modern materials and construction methods. Reproduction cost new is the cost to construct an exact replica. The question describes building a replica with current materials and standards, which aligns with replacement cost new.
Why the other options are wrong
- A. The comparative-unit method uses the cost per square foot or cubic foot of comparable structures.
- B. The unit-in-place method estimates the cost of individual components (e.g., walls, roof) including labor and materials.
- D. The quantity survey method involves a detailed breakdown of all materials, labor, and overhead, which is the most accurate but time-consuming.
Replacement Cost New
The cost to construct a building with the same utility as the subject property, using modern materials and current construction standards.
- Focuses on utility, not an exact duplicate.
- Used in the cost approach to valuation.
- Accounts for modern building techniques and materials.
Memory trick: Cost approach rebuilds value from the ground up.