How is RCNLD (Replacement Cost New Less Depreciation) calculated?

Replacement Cost New Less Depreciation (RCNLD) is a method used to estimate the value of a property by considering the cost to replace the asset with a new one (at current prices) and then subtracting any depreciation, which accounts for wear and tear, age, and other factors that diminish the value over time.

The correct calculation for RCNLD involves taking the total value of a property and separately accounting for the land value. This method highlights that the value associated with any structures or improvements on the property may differ from the land value itself. The calculation therefore focuses on the value of the property excluding the land, which is consistent with how replacement costs are determined in appraisals.

Thus, to compute RCNLD accurately, one must subtract the land value from the sale price (SP), reflecting just the depreciated value of the improvements or structures. By doing this, the calculation provides a clear view of the value of the property excluding the land, leading to a more precise appraisal.

This reasoning aligns perfectly with the functioning of the RCNLD concept in real estate valuation.