California Real Estate Practice Exam

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In the cost approach to valuation, what is the cost to create an exact duplicate of the building called?

Market cost
Replacement cost
Reproduction cost
Construction cost

The correct answer is: Reproduction cost

The cost to create an exact duplicate of the building is called the reproduction cost. This approach is based on the premise that the value of a property is equal to the cost of creating a replica of that property. This includes the cost of labor, materials, and any other expenses associated with constructing the building. Market cost, on the other hand, is the price that a property would achieve in an open and competitive market. Replacement cost only takes into account the cost of replacing the existing property with a new one. Construction cost is a component of both reproduction and replacement cost, as it refers specifically to the cost of constructing the building.