Usually the replacement cost (new) of subject buildings is determined by applying a unit cost of construction to the gross floor area. The valuer encounters difficulty in the choice of appropriate cost index especially in situations where the services of cost experts may not be directly engaged. In such cases as often occur in the valuation of the fixed assets; a range of costs may be obtained for different kinds of structures form the analysis of costs of comparable properties. The process involves a lot of refinements and adjustments since buildings are seldom alike in designs and finishings. The refinements are to take care of the differences or variations between the bench mark property and the subject building under consideration. Where the buildings under valuation are o complex design and construction, the valuer often retains the services of cost consultants such as quantity surveyors for the supply of the relevant cost index for use in his valuation.
Such estimates of cost, however, have to be subject to scrutiny and expert judgment to the satisfaction of the Valuer before being adopted in his valuation. The problem here is better appreciated where costs consultants provide divergent cost estimates as sometimes occurs in practice. It follows therefore, that the Valuer has to be abreast with trends in construction costs if the opinion of his value is to be reliable. Where the services of cost experts are retained, the Valuer again is faced with the problem of adjusting the cost estimate supplied, to take care of excessive ornamentations or other forms of surplusage which add little or nothing to the value of the subject property.
