Cost Apporach Flashcards
Cost approach
Value based on the current cost of reproducing or replacing the improvements minus loss in value from depreciation plus land value
Direct costs
Expenditures for labor and materials used in the construction of improvements.
Indirect costs
Expenditures that’s are not typically part of the construction contract.
Entrepreneurial profit
The amount the developer expects to receive as payment for his or her efforts and expense as compensation for his or her coordination and expertise and his or her assumption of risk I. The development of the project
3 types of costs included in estimAte if cost new
- direct costs
- indirect costs
- entrepreneurial profit
3 methods of cost estimating
- quantity survey method
- segregated cost method (unit in place method)
- calculator method ( comparative unit)
Quantity survey method
Quantity of all materials for constructions. Most comprehensive.
Segregated cost method
Unit cost for structural components or groups.
Calculator method
Used to derive a cost estimate in terms of dollars per unit of area or volume. Used by caltrans.
Depreciation
In appraising a loss in property value from any and all causes.
Physical deterioration
Loss in value due to wear and tear
Deferred maintenance
Items of wear and tear on a property that should be fixed now to protect the value or income producing ability of the property such as a broken window.
Functional obsolescence
Lacks appeal. Loss in value caused by a flaw in the structure materials or design. Diminishes function.
External obsolescence
Loss in value to negative forces outside of the property.
Curable depreciation
The cost to repair or cure the items causing the depreciation is less than the loss in value due to the items
Incurable depreciation
The cost to repair or cure the items causing the depreciation exceeds the loss in value due to the items. “Live with it”
Economic age life method
A total lump sum deduction. Straight line basis.
Actual age
The number of years elapsed since construction age
Effective age
The age indicated by the condition and utility of a structure and considering the external forces that affect the value.
Total economic life
The period over which improvements contribute to value.
Remaining economic life
The length of time from the date of valuation to the improvements economic life
Effective age + remaining economic life is…
Actual age is not considered in this context.
Total economic life
% of depreciation
Effective age divided by total economic life
