Question

In the cost approach, an appraiser uses which of the following?

a. sales price of similar properties

b. the owner's original cost of construction

c. an estimate of the building's replacement cost

d. the property's depreciated value as used for income tax purposes

Answer 1

In the cost approach to property valuation, an appraiser estimates the building's replacement cost, subtracts depreciation, and adds the land value to determine the property's value. It's commonly used for unique properties that don't sell often on the market. Option C

Step-by-step explanation:

In the cost approach to property valuation, an appraiser primarily uses c. an estimate of the building's replacement cost. This method involves calculating the current cost to replace the building with a new one of similar construction and functionality, then subtracting any accrued depreciation. The land value is then added to this depreciated cost of the building to arrive at the total property value.

The cost approach is often used for types of properties that do not frequently sell on the open market, such as schools, hospitals, or churches. It is one of three main methods in real estate appraisal, the others being the sales comparison approach and the income approach. Each approach has its own set of pertinent considerations and is chosen based on the type of property being appraised and the reason for the appraisal. Option C