Chapter 5 cost approach replacement/reproduction costs cost new Flashcards
The three traditional methods of estimating costs will be introduced:
Comparative-unit method
Unit-in-place method
Quantity survey method
The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all the deficiencies, superadequacies, and obsolescences of the subject building.
reproduction cost
The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout.
replacement cost
The definition of replacement cost includes using \_\_\_\_\_\_\_materials and \_\_\_\_\_\_\_\_\_ standards, design and layout. Imitation, modern Modern, current Equivalent, new Today's, equivalent
modern, current
A \_\_\_\_\_\_\_\_\_ cost estimate eliminates functional obsolescence. Reproduction Replacement Depreciated None of the above
replacement
If a property is older or exhibits unusual construction, then perhaps the more accurate method would be to use a reproduction cost.
True
False
true
Reproduction cost involves estimating the cost of a \_\_\_\_\_\_\_\_\_\_, while replacement cost estimates the cost of a \_\_\_\_\_\_\_\_\_\_\_ property. Substitute, replica Substitute, duplicate Replica, substitute Similar structure, duplicate
replica, substitute
Using the Marshall & Swift Residential Cost Handbook will result in an estimate of \_\_\_\_\_\_\_\_\_\_ cost. Reproduction Utility Replacement Depreciated
replacement
Reproduction cost estimates the cost to construct a building embodying all the deficiencies, superadequacies, and obsolescences of the subject building.
True
False
true
The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout is the definition of replacement cost.
True
False
true
Most fire and casualty insurance is written to pay an amount equal to the replacement cost of the structure.
True
False
true
Which type of cost estimate eliminates functional obsolescence?
Replacement cost only
Reproduction cost only
Both reproduction and replacement cost
No type of cost eliminates functional obsolescence
replacement cost only
If a property is older or exhibits unusual construction, then perhaps the more accurate method would be to use a reproduction cost.
True
False
true
Where does this cost data come from? Cost data may be obtained from:
Construction contracts for similar properties Appraiser's files Local building contractors Professional cost estimators Cost estimating services
Expenditures for the labor and materials used in the construction of improvements; also called hard costs.
direct costs
Expenditures or allowances for items other than labor and materials that are necessary for construction, but are not typically part of the construction contract. Indirect costs may include administrative costs; professional fees; financing costs and the interest paid on construction loans; taxes and the builder’s or developer’s all-risk insurance during construction; and marketing, sales, and lease-up costs incurred to achieve occupancy or sale. Also called soft costs.
indirect costs
The amount an entrepreneur expects to receive for his or her contribution to a project. Entrepreneurial incentive may be distinguished from entrepreneurial profit (often called developer’s profit) in that it is the expectation of future profit as opposed to the profit actually earned on a development or improvement. The amount of entrepreneurial incentive required for a project represents the economic reward sufficient to motivate an entrepreneur to accept the risk of the project and to invest the time and money necessary in seeing the project through to completion.
entrepreneurial incentive
Direct costs include:
Building permits Materials used to construct buildings Labor used to construct buildings Equipment used in construction Security during construction Contractor's shack and temporary fencing Material storage facilities Installation of power line Contractor's overhead and profit Worker's compensation, fire and liability insurance
Indirect costs include
Architectural and engineering fees
Appraisal, accounting and legal fees
Cost of carrying the investment - points, service charges and interest on construction loans
Insurance and taxes during construction
Marketing, sales and lease-up costs and commissions
Administrative expenses of the developer
Costs of title changes
Cost of carrying the investment after construction until stabilized occupancy is achieved
