Texas Real Estate Appraisal Practice Exam

The index method is a technique used in real estate appraisal that adjusts the original cost of a building by applying an index or factor that accounts for changes in construction costs over time. This adjustment reflects the current value of the building as of the appraisal date, taking into consideration inflation, changes in material costs, labor rates, and other economic factors that influence construction expenses.

Using an index allows appraisers to estimate the current replacement cost of a property without having to physically measure or assess each component individually. Instead, they rely on established indices that track construction costs and apply these factors to the original cost to arrive at an updated value. This method is particularly useful for older properties where detailed quantitative data may not be readily available.

The other methods, such as quantity survey, square-foot, and unit-in-place, involve more detailed computations based on measurements and specific construction methods, rather than solely relying on an index or factor to adjust the original cost. Each of these methods has its own advantages and applications, but the index method specifically focuses on a broader economic adjustment reflecting changes in construction costs over time.