Estimating Cost 

ESTIMATING COST 

  In accordance with the Alabama Property Tax Plan for Equalization each of the sixty-seven (67) counties in alabama are required to utilize the Alabama Appraisal Manual as a guideline for the reappraisal program.

Appraisers utilize the Alabama Appraisal Manual to inventory and classify real property (commonly known as:  listing).  Utilization of the manual, application of appraisal theory, a thorough knowledge of the market and years of experience result in fair, equitable and reasonable market value conclusions.

Periodically, or at the request of the State Department of Revenue, each county will conduct an Index Study.  The Index Study is designed to develop an index to factor historical construction costs to present day construction costs for application to the County's Computer Assisted Mass Appraisal System (C.A.M.A.).

Click here to view additional data on the Alabama Appraisal Manual Building Cost System.


COST STUDIES

There are several methods used to arrive at a cost value: the quantity survey method, the unit-in-place method, and the square foot method.    

The quantity survey method requires that the appraiser create a detailed inventory of every item of material, equipment, labor, overhead, and fees involved in the construction of a property. This method is not routinely used by appraisers because it is extremely time consuming.  

The unit-in-place method is less detailed than the quantity survey method, but still reasonably accurate and complete. This method combines direct and indirect costs into a single cost for a building component (the unit-in-place) which is then multiplied by the area of the portion of the building being valued to arrive at a total cost for that component. This is the method used in the Alabama Appraisal Manual prescribed by the Alabama Department of Revenue, for many building components.

The square foot method combines all the costs for a particular type and quality of structure into one value as a cost per square foot (or cubic foot). This method produces a value based on the floor area of the structure.

The cubic foot method is used when the wall height varies within a building class, such as warehouses or factories. Generally the square foot or cubic foot methods are not considered sufficiently accurate compared to the first two methods for estimating cost.  

Once replacement cost new (RCN) or reproduction cost new (RPD) has been calculated, depreciation must be estimated in order to arrive at a current value (unless an improvement is new, some depreciation exists).