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?

  1. Market cost

  2. Replacement cost

  3. Reproduction cost

  4. 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.

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