Kansas RMA Eligibility Practice Exam

What does Replacement Cost measure in property valuation?

Cost of construction at current prices of a building having equal utility to the subject but built using modern materials, standards, design, & layout. Cost of constructing an exact duplicate, including materials, construction standards, design, & layout. Cost to cure is the measure of the deterioration. Loss in value due to external forces outside the property.

Correct Answer:

Cost of construction at current prices of a building having equal utility to the subject but built using modern materials, standards, design, & layout.

Explanation:

Replacement Cost is the cost to construct a building that provides the same utility as the subject property, but built with current prices and using modern materials, standards, design, and layout. It focuses on functional equivalence rather than an exact, one-for-one copy of the original structure, so it reflects today’s cost to create something that serves the same purpose. This differs from reproduction cost, which would require duplicating the exact original materials and design. The idea of cost to cure addresses repairs needed to fix deterioration, not the cost to replace the building, and the notion of loss in value due to external forces refers to external obsolescence, not replacement cost.

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