Methods Used To Determine Value – Cost Approach

The "Site Valuation and Cost Approach" is the most commonly used method in determination of market value for new construction and special purpose properties that are unique.

This method is great for new construction because the appraiser does not have to worry about depreciation, which can be difficult to calculate. In addition, the cost to build may in fact be market value, but there are exceptions. This approach is also great for special purpose properties because comparable sales may be hard to find or non-existent.

With this approach, the appraiser uses comparable sales to determine the value of the land and cost estimates to determine the value of the improvements and depreciation. The value of the land plus the cost of the improvements minus depreciation equals the value of the property.

Deborah Reece