If a similar house costs $338,000 to build and is 2,600 square feet, what is the estimated reproduction cost of a 2,500 square foot house?

To determine the estimated reproduction cost of a house based on the cost of a similar house, the first step is to calculate the cost per square foot of the known house.

In this case, the similar house, which costs $338,000 to build, is 2,600 square feet. The cost per square foot can be calculated by dividing the total cost by the square footage:

Cost per square foot = Total cost / Square footage = $338,000 / 2,600 square feet = approximately $130 per square foot.

To find the reproduction cost of the house that measures 2,500 square feet, you multiply the cost per square foot by the new house's square footage:

Reproduction cost = Cost per square foot × Square footage of the new house = $130 × 2,500 = $325,000.

Thus, the estimated reproduction cost for the 2,500 square foot house is $325,000. This method of calculating reproduction cost reflects the principle of substitution in real estate, which implies that a typical buyer would not pay more for a property than the cost to reproduce it with similar utility.