Three main methods are utilized for estimating structure replacement costs when using the cost approach. They are 1) the comparative unit method; 2) the quantity survey method; and, 3) the unit in place method.
Comparative Unit Method: This method is most effectively used when there is nothing particularly special about the building being appraised. It is the easiest and most commonly used technique for estimating replacement costs. To apply, the appraiser simply identifies the average cost per square foot (or cubic foot) to build a replacement structure and mulitplies by the number of square feet in the replacement structure. Average cost information can usually be found in local tax district files or in national construction cost manuals such as Marshall & Swift, Boecha or S.W. Dodge.
Quantity Survey: Looks much like a contractor's line item bid. This method requires significant work and familiarity with construction techniques. Quantity surveys are seldom used by assessors valuing old buildings. However, when the subject building has just been completed and the construction bids are still current, this method can produce very accurate estimates of replacement costs.
Unit-In-place Method: This method determines the unit cost of all building labor and materials and multiplies the sum by the amount actually used on the building. For example, if painting the building's exterior costs $.30 psf, then the cost of painting 1,000 sf would be $300. Unit costs of various components are usually based on information from local tax district files or construction cost manuals.
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