Reproduction Cost | Propertylogy

Reproduction Cost

By on September 8, 2018

Reproduction cost in real estate refers to the total costs of an exact duplication of a property and it’s improvements as of a certain date.

The definition can resemble that of replacement cost, it is very different when we look into the details.

Because while replacement cost (used by insurers) describes just the replacement of functional utility of a property, reproduction cost describe the complete mirror replication of the property, including all it’s interior components.

For example, if a building with high ceilings with an interior made of gold, replacement cost might only account for a new building with high ceilings. Reproduction cost will account for all the gold interior furnishing and fixtures too.

When a cost approach of valuation is used by an appraiser to estimate the value of a property, he would determine whether to use either a replacement or reproduction cost, plus land value, and deduct depreciation for estimated obsolescence and wear.

For example, if the reproduction cost of a building is estimated to be $450,000, wear and tear could account for $80,000, while functional obsolescence work out to $90,000. The final value would be $280,000 after accounting for appraisal depreciation.

Quantity surveys and unit-in-place are also two appraisal methods used with the sole purpose of calculating reproduction costs.



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