Toolkit uses replacement cost data from the 2024 Craftsman National Building Cost Manual to complete depreciated cost adjustments and Cost Approach. This document provides additional detail on how cost data is applied within Toolkit.

Overview

Replacement Cost New represents the cost to build a suitable replacement of the improvements (dwelling, garage, etc.) on a property. Replacement costs include all construction costs: labor, material, equipment, plans, building permits, supervision, overhead, and profit. Replacement costs do NOT include depreciation or site value (land, site preparation, and development, utility lines, or other government-mandated fees). Depreciation and site value are determined by the user via the extraction method, to calculate the overall market value of a property (learn more here).

Local Costs

Replacement costs vary across the United States. Craftsman provides area modification factors to reflect differences in costs of labor, materials, and equipment costs across individual zip codes. In Aloft Appraiser Toolkit, replacement costs for site-built improvements include these area modification factors, providing locally relevant cost data. 

Quality Level

Construction quality has a significant impact on replacement costs. Craftsman provides a numerical quality scale (1-6 for single-family homes, 1-5 for manufactured or multi-family homes), see our quality guide here. In Toolkit, the user can specify the quality level to the decimal for further precision. This quality level is applied to the main dwelling, basement, garage, carport, porch, patio, deck, attic, and ADU. Other structures such as sheds, workshops, barns, pools, and spas have a separate quality scale provided by Craftsman.

Costs by Structure

Dwelling

At any given quality level, the cost to build includes both fixed costs and variable costs (i.e., extra costs for each additional square foot or each additional plumbing fixture). Within Toolkit, Craftsman data at each quality level is applied using the following framework: 

Fixed cost + Variable cost for each square foot + Variable cost for each full/half bath = Total dwelling cost 

For most homes, variable costs comprise the majority of total cost. By breaking down total replacement cost into fixed and variable costs (and subsequently, depreciating them), we can calculate precise adjustments for GLA, baths, quality, and condition without double counting. 

Basement

Basement costs are calculated using the following formula:

Variable cost for each square foot (regardless of finish) + Variable finishing cost for each square foot of finished area + Variable cost for each full/half bath = Total basement cost

Garage

Garages have a fixed and variable cost:

Fixed cost + Variable cost for each square foot  = Total garage cost

Additional Structures

Other structure costs are calculated based on variable costs per square foot. Carport, porch, patio, deck, and attic costs are scaled based on the property’s Craftsman quality level while pool, spa, barn, shed, workshop, and fireplaces are calculated using their own scale provided by Craftsman.  

Manual Costs

The user can add a manual cost for any items not already covered (this is rare). Costs should be inputted as “cost new” before depreciation is applied.

How to Use Cost Data

Toolkit automatically re-calculates costs (new and depreciated) as the user updates information about their subject and comparables. Users are responsible for validating property features, including estimation of construction quality and effective age (depreciation), for accurate cost results (learn more about the quality guide here). 

Since Toolkit uses the extraction method, the analysis is bounded by market-observed sale prices. Any errors in replacement cost estimation will fall into depreciation or site value and can be remediated by updating property features or construction quality.