Property ValuationIntermediateDelaware Exam
In the cost approach, 'reproduction cost' refers to:
AThe cost to build a similar building with modern materials
BThe cost to build an exact replica of the original building using the same materials and methodsCorrect
CThe cost of purchasing a substitute property
DThe current market value of comparable buildings
Why The cost to build an exact replica of the original building using the same materials and methods Is Correct
Answer B: The cost to build an exact replica of the original building using the same materials and methods
Reproduction cost is the cost to construct an exact replica of the subject building using the same materials, design, and construction methods at current prices. It differs from replacement cost, which allows modern equivalent materials.
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.
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