Property Valuation
An Oregon appraiser is valuing a new commercial building using the cost approach. Which of the following best describes 'replacement cost'?
AThe original cost of constructing the building when it was built
BThe cost to construct a building of equal utility using current materials and standards✓ Correct
CThe cost to rebuild the exact same building with identical materials
DThe purchase price paid by the current owner
Explanation
Replacement cost is the cost to construct a building of equal utility using current construction methods, materials, and standards — it does not have to be identical to the original. This contrasts with 'reproduction cost,' which is the cost to rebuild an exact duplicate. Replacement cost is more commonly used in appraisal practice.
Related Oregon Property Valuation Questions
- What is 'regression' and 'progression' as principles of value in Oregon real estate?
- Which principle of value explains why a house that sells for much more than all other homes in the neighborhood will likely sell for less than its construction cost?
- In an appraisal, the process of 'reconciliation' refers to:
- Under the cost approach, 'accrued depreciation' refers to:
- Under the Uniform Standards of Professional Appraisal Practice (USPAP), an appraiser's primary ethical obligation is to:
- The 'cost approach' to appraisal uses which formula?
- In real estate appraisal, the term 'market value' is best defined as:
- An appraiser performing a 'drive-by' or exterior-only appraisal produces what type of report?
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