Replacement Value Of A Property: 4 Basic Factors

When one seeks to sell the regular, average, residential property/ home, the best way to determine the listing (offering) price, is based on a Competitive Property Analysis, where one examines similar properties, known as Comparables, and either adds or subtracts, based on features, inclusions, etc. This is the most common method used in real estate, and is generally effective, when seeking to find the fair market value, or, at least, what one believes it will be. Of course, the market value is only determined by the price a qualified buyer offers and is willing to pay for a particular property. However, there are certain circumstances where this method can’t be used effectively, either because of a lack of Comparables, or the type of property (something unique, etc). Let’s briefly examine 4 factors, which go into one’s determination of the Replacement Value, of a particular property.

1. Value of the land: How much would it cost to buy the land, itself, the structure is located on? One might begin his search on Multiple Listing Service, to see if there are Comparables, however, if there are an insufficient number, one of the best ways to determine this, is to discuss valuation of land, with several local builders (how much they would pay, and why?).

2. Cost of Materials: What will it cost to purchase the necessary building materials? Are you planning to merely fix the existing structure, or demolish it, and replace it, with a structure serving a different purpose? Remember, demolition is an expense, so factor that cost in, as well. Sometimes, one finds difficulty estimating these costs, so, builders often estimate costs, based on the unit price, or price – per – square – foot.

3. Cost of Labor (including legal, architecture, construction permits, etc): How many man – hours might be necessary, to complete your endeavor? What will these workers costs amount to? What types of permits and/ or variances might be needed, and what would they cost? Those using the unit cost – method, often factor these expenses into their total costs per square foot!

4. Purpose, or re – purpose: Are you planning on replacing something, for the same purpose as it presently has, or is the goal to re – purpose it? For example, one might purchase an old fire house, and replace it with a strip mall, individual store, restaurant, etc. You have to have a clear picture of what the end – result you seek is, or how will you be able to estimate the replacement cost.

Obviously, this is a complex, complicated procedure, which one should obtain assistance with. This help should come from a combination of real estate professionals with relevant experience, architects, builders, lawyers, etc.

Immobilienmakler Heidelberg

Makler Heidelberg

Source by Richard Brody

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