DRC / Contractor’s Method

Question 1

When is the DRC method used?

Answer 1

• When market evidence is limited or unavailable, particularly for specialist properties such as utilities, refineries or schools.

Question 2

What is the two‑step DRC methodology?

Answer 2

• Value land in existing use.
• Add replacement cost of buildings and adjust for depreciation.

Question 3

What types of obsolescence must be considered?

Answer 3

• Physical: deterioration or wear and tear.
• Functional: outdated design or specification.
• Economic: external changes reducing utility or value.

Question 4

Why is DRC not used for secured lending?

Answer 4

• Because it is not suitable for Red Book‑compliant secured lending valuations due to limited market evidence.

Question 5

What must be reported alongside a DRC valuation?

Answer 5

• Alternative use value if higher.
• Viability of continued occupation (public sector) or profitability (private sector).

Question 6

Why are BCIS cost data important in DRC valuations?

Answer 6

• They provide reliable benchmark build costs for calculating replacement cost.