If I asked you to use an online BMI calculator to pick the fittest person out of five people, would you be able to accurately pick the fittest?
No, because there are so many additional variables that need to be taken into account.
It’s the same with property.
Online calculators for property replacement costs are all but useless.
Just to prove this point, I went onto 5 different online replacement cost calculators (from insurance brokers and underwriters websites) to determine the replacement value of a particular property.
The variances are staggering.
Not only do these calculators under-estimate the construction value, they do not include an allowance for the demolition of the existing structure and removal of debris from site, nor do they include an allowance for cost escalations or consultant’s fees.
That’s a lot of costs to exclude from the estimate.
The actual replacement value for the example property is $668,559. That’s a much larger cost than the online calculators estimated the value to be.
The lowest value calculated was $226,160.
The highest value calculated was $535,000.
That is a variance of 137% between the highest and lowest cost calculators.
The highest cost calculator was 25% less than our estimate.
So how do property professionals calculate the replacement cost value for their properties?
I can tell you this:
- No builder uses an online cost calculator to determine how much he is going to tender for a build.
- No developer uses a cost calculator to select a builder to use.
- No bank uses a cost calculator to fund a development.
Nor do they use the services of a Valuer to determine these costs.
But they all use Quantity Surveyors.
That’s because Quantity Surveyors have the experience and expertise to accurately estimate the costs for a specific property, taking into account any unique characteristics.
We take away the guesswork.
It just makes sense.