Basic Appraisal Procedures- Cost Approach Cost Estimating Review Questions with Complete Solutions

Basic Appraisal Procedures- Cost Approach Cost Estimating Review Questions with Complete Solutions Substitution - Answers The basic principle in the cost approach. Cost approach formula - Answers Reproduction or replacement cost new Less accrued depreciation + site value = Property Value Cost approach - Answers Which approach is the oldest of the traditional approaches? True - Answers If appraising something other than fee simple interest, an appraiser can make an adjustment to the indicated value by cost approach in order to reflect the value of the property being appraised. The subject is a special purpose property - Answers The cost approach would be most applicable when? Whenever it is necessary to produce credible assignment results - Answers When is an appraiser required by USPAP to develop the cost approach? False - Answers The cost approach is most applicable in situations where the site value is not well-supported. Direct Costs Indirect Costs Entrepreneurial incentive - Answers All cost estimates to be used in the cost approach need these 3 basic ingredients: Direct costs - Answers Hard costs; labor and material Indirect costs - Answers Soft costs; administrative, professional fees, financing and interest, taxes, marketing, etc Entrepreneurial incentives - Answers The amount an investor expects to receive for his contribution to a project Cost approach - Answers A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of (or replacement for) the existing structure. Reproduction cost - Answers The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised; using the same materials, construction standards, design, layout, and quality of workmanship and embodying all the deficiencies, superadequacies, and obsolescence of the subject building. Replacement cost - Answers The estimated cost to construct, at current prices as of the effective appraisal date, a building with utility equivalent to the building being appraised, using modern materials and current standards, design, and layout. Depreciation - Answers In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. In accounting, an allowance made against the loss of an asset for a defined purpose and computed using a specified method. Cost data sources - Answers Construction contracts for sim properties; appraiser's files; local building contractors; professional cost estimators; cost estimating services Major cost estimating services - Answers Marshall & Swift; F.W. Dodge Corporation; RS Means Company, Inc. Produce and periodically update compendiums of building costs for all types of structures under appurtenant site improvements - Answers What does a cost estimating service do? Building permit - Answers Example of a direct cost Contractor's overhead and profit - Answers Direct cost Worker's comp, fire and liability insurance - Answers Direct cost Appraisal fee - Answers Indirect cost Insurance and taxes during construction - Answers Indirect cost Costs of title changes - Answers Indirect cost Entrepreneurial profit - Answers The amount an entrepreneur actually receives No - Answers Are entrepreneurial incentives included in a cost estimating service? Comparative-unit method; unit-in-place method, quantity survey method - Answers 3 traditional cost estimating methods Index method - Answers Similiar to the cost of living index----applying a multiplier to bring up to a present cost Replacement cost - Answers When a published cost manual is used, the result is _______________. Square foot - Answers The most common unit of construction cost in residential properties is cost per ___________.