cost approach

cost approach

An appraisal method that estimates the cost to reproduce or replace an improvement and then subtracts an amount for depreciation to reach the current condition of the property. Of the three approaches—comparison to comparable properties, capitalization of income,and cost—cost is the one deemed least reliable overall,but most necessary in the case of unusual properties with no realistic probability of a tenant.

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The cost approach has been an integral yet controversial part of the appraisal process for many years.
In regards to the county auditor's methodology, the court noted that the property-record card indicated that the auditor relied exclusively on the cost approach to valuation.
The fundamental principle of the cost approach is that a potential user of Property should not pay more for a property than it would cost to build an equivalent.
A cost approach would measure fair value based on the current cost to replace the service capacity of an asset.
Generally, valuation of commercial real estate is based on one or a combination of the following three approaches: The market approach, the income approach, and the cost approach.
For the cost approach, look at the number of slips, slip length and overall lineal feet of dock.
The cost approach is a set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive, deducting depreciation from the total cost, and adding the estimated land value.
Residential Appraiser Site Valuation and Cost Approach
The cost approach values IP based on the cost to obtain it; the income approach values it based on its income-producing ability.
AXA will transition from a traditional fixed cost approach to one in which vital technology is accessed as a flexible, variable cost service.
Cost approach is another of the three recognized approaches used in appraisal analysis, and is based on the proposition that the informed purchaser would pay no more for a property than the cost of producing a substitute property with the same utility as the subject property.

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