An appraiser is valuing a unique heritage property with no recent comparable sales. The replacement cost is $800,000, land value is $300,000, and total depreciation is estimated at $200,000. What is the indicated value using the cost approach?
Correct Answer
C) $900,000
Cost approach: land value + (replacement cost - depreciation) = $300,000 + ($800,000 - $200,000) = $300,000 + $600,000 = $900,000. The cost approach suits unique properties, such as heritage buildings, for which comparable sales are scarce.
Why This Is the Correct Answer
Land $300,000 plus depreciated improvements ($800,000 - $200,000 = $600,000) equals $900,000. This is the indicated value under the cost approach.
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Previous Question
An appraiser is valuing a unique heritage property with no recent comparable sales. The replacement cost is estimated at $800,000, land value is $200,000, and total depreciation is calculated at $150,000. What is the indicated value using the cost approach?
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An income-producing property generates $120,000 in annual rental income and has operating expenses of $45,000. If investors in this market expect a 7% capitalization rate, what is the indicated value using the income approach?