{"id":4513,"date":"2018-02-21T02:01:25","date_gmt":"2018-02-21T02:01:25","guid":{"rendered":"http:\/\/www.realestatewords.com\/?page_id=4513"},"modified":"2021-03-16T16:09:11","modified_gmt":"2021-03-16T16:09:11","slug":"index-method","status":"publish","type":"page","link":"https:\/\/www.realestatewords.com\/index-method\/","title":{"rendered":"Index Method"},"content":{"rendered":"

Index Method Definition<\/h2>\n

Index method is a calculation method to determine how much construction costs have increased since a building was built.<\/p>\n

Explanation<\/h2>\n

Index method involves multiplying an original construction cost by a multiplier that is reached based on the margin of increase in construction costs since a property was built. This method is often used as an indicator for specific building costs associated with a particular property.<\/p>\n

As an example, if a property costs a hundred thousand dollars to build at the original construction date, and the current index for the same type of structure is at 1.60, the calculation is a hundred thousand multiplied by 1.60, to equate to the cost to construct the same building today.<\/p>\n

There are many ways to look at properties with regards to their reproduction, and the index method is one that is often used for specific commercial properties. Most homeowners insurance<\/a> claims do not use this method as they prefer replacement cost<\/a>.<\/p>\n

Additionally, residential appraisers<\/a> do not usually use this method as they mostly use the sales comparison approach<\/a>.
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