Certified Residential Appraiser Practice Exam

What method estimates building costs by adjusting the original cost with a percentage factor?

1. Quantity survey method

2. Index method

3. Comparative unit method

4. Unit-in-place method

The correct answer is: Index method

The method that estimates building costs by adjusting the original cost with a percentage factor is the index method. This approach uses historical cost data and applies an index factor to account for inflation or changes in construction costs over time. By applying this percentage adjustment to the original cost, appraisers can arrive at a current estimate that reflects present conditions. This method offers a straightforward way to update values based on recognized indices, which can represent regional or national construction cost trends. It is particularly useful for quickly adjusting costs without requiring comprehensive analysis of each individual cost component, making it a practical tool for appraisers and others who need to estimate current construction costs efficiently. In contrast, the quantity survey method involves a detailed breakdown of every component and its associated costs, while the comparative unit method focuses on average costs per unit of measure for similar properties. The unit-in-place method assesses costs based on the entire assembly of components installed, which can be more complex and less flexible in adjusting historical costs.