An appraiser valuing a newly built warehouse with no rental history uses the cost approach as the primary valuation method. Why is the cost approach often most relevant for new or special-purpose properties?
Correct Answer
D) Because new construction has minimal depreciation, making cost estimates more accurate reflections of value
For new construction, depreciation is minimal, so the cost to build the property closely approximates its market value. As properties age, depreciation estimates become less reliable, which is why the cost approach is most useful for newer buildings.
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