Under the cost approach to appraisal, value is calculated as:
Correct Answer
B) Replacement cost minus depreciation plus land value
The cost approach estimates property value by calculating the cost to replace or reproduce the improvements, subtracting accrued depreciation, and then adding the estimated land value. The formula is: Value = Replacement Cost - Depreciation + Land Value.
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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.
Depreciation is an accounting method of allocating the cost of an asset over its useful life, allowing investors to deduct a portion of the asset's cost each year.
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