The Replacement Cost Method of Estimating a Propertys Value

The replacement cost method of estimating a property's value is based on the cost of replacing the improvements on the property minus the cost of the land to estimate a property's value. Replacement costs are calculated on a per square foot basis by dividing the total number of square feet in the building by the per square foot construction cost. For example, a 2000 square foot convenience store that cost $275,000 to build would have a replacement cost of $137.50 per square foot ($275,000 + 2000). You can usually get a free building replacement cost estimate by calling a local independent insurance broker who represents insurers that specialize in providing property and casualty insurance coverage for residential and commercial buildings. Property replacement costs are calculated by using a replacement cost formula that is based on the property's geographical location and its:

1. Street address.

3. Type of construction.

4. Number of stories.

6. Current use.

7. Heating and cooling system.

8. Square footage.

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