In the cost approach, what is 'reproduction cost' vs. 'replacement cost'?
Why Reproduction cost = cost to build an exact replica; replacement cost = cost to build a building with equivalent utility using modern materials/methods Is Correct
Answer B: Reproduction cost = cost to build an exact replica; replacement cost = cost to build a building with equivalent utility using modern materials/methods
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
Key Property Valuation Terms in This Question
People Also Study
Related California Questions
- In the cost approach, 'reproduction cost' differs from 'replacement cost' because:Property Valuation
- An appraiser is using the cost approach to value a 10-year-old building. The replacement cost new is $400,000 and the building has experienced 25% total depreciation. The land is valued at $120,000. What is the indicated value?Property Valuation
- An appraiser values a property using the sales comparison approach and finds that a comparable property has a swimming pool worth $15,000 but the subject property does not. What adjustment does the appraiser make?Property Valuation
- An appraiser is reconciling three value indicators from the three approaches: Cost approach = $485,000; Sales comparison approach = $475,000; Income approach = $460,000. The subject is an owner-occupied single-family home. Which approach should receive the most weight?Property Valuation
- A building has a replacement cost of $500,000 and is 30 years old with an estimated 50-year useful life. Using straight-line depreciation, what is the accrued depreciation?Real Estate Math
Key Terms to Know
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Study This Topic
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →