The cost approach to appraisal estimates value by calculating which of the following?
Correct Answer
A) Replacement cost of improvements minus depreciation plus land value
The cost approach estimates value by calculating the cost to replace or reproduce the improvements, minus accrued depreciation, plus the value of the land. It is most useful for unique properties, new construction, or special-use properties where comparable sales are limited.
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Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
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