Cost Approach Analysis

The cost approach to the market value of the property calculates how much a new home of this size and type would currently cost to build. The appraiser applies current industry and market price estimates for the underlying land, building supplies and construction costs.

The appraiser would then subtract the subject property's depreciation (physical, functional and external aging) from that new cost price to determine the cost approach value.

The cost estimate is an integral part of all property appraisals of buildings. But it is not the whole story, because it does not fully take into account current market forces.

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Real Estate 101

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