Reproduction Cost New vs Replacement Cost New

[Mztk1]

To make the matter more confusing, if you read Fannie Mae on the cost approach in their guidelines they say we are doing "Reproduction" costs. To them, I infer, it is reproduction up to the point of applying any type of depreciation, after which time the end result is replacement. I don't agree with that. When I am to reproduce a house built with old growth cypress, or hand carved molding from the 17th Century, I am going to incur a much higher cost than if I am to replace that house (if replacement is even possible). On the other hand, the Marshall & Swift states its figures are for estimating "Replacement Costs".

 

[Scott Lanz]

A frog with with a pistol....sweet.

 

[Ken B]

Just to play The Devel's Advocate.................How do ya know that there will or will not be functional depreciation without doing the market approach first?

Your personal experience?
Just an opinion but unsupported?
Prejudicial AND unsupported opinion?

An "Everybody knows that................." type an answer is not acceptable.

If a property with a solid gold crapper costing $2.5MM sells for the same price as a property with a porcelain crapper costing $150 and discussion with other parties knowledgeable about the market area reveals that there are no known properties with a similar solid gold crapper, the feature is superadequate.

Now, I haven't appraised any properties with a solid gold crapper, but I have known some property owners who you would think would sit on nothing else.

I did appraise a property with a half-court basketball court and full-blown locker room in the basement once. The builder had to excavate a 20' deep hole in the ground for the court. The advantage of the feature is that if the power ever went out in a storm (no back-up generator), the sump pumps in each corner of the half-court would stop working and you would have an indoor pool instead! You could cut a whole in the living room floor and install a diving board. Now that is convenient!

Research indicated that someone might have heard about one other property in the area that might have had a similar feature. Turned out the purchaser of this new custom built home was the same person who was the original owner of the other home with a basement half-court. If I recall, I didn't assign much value to that feature in that fairly new home (less than a year old.)