1. In the cost approach, the appraiser estimates value by:
Answer & explanation
Answer: B. Cost approach: replacement (or reproduction) cost new - depreciation + land value. Land is valued separately because it does not depreciate.
valuation
cost approach
An appraisal method that estimates value by calculating the current cost to reproduce or replace the improvements, subtracting accrued depreciation, and adding the value of the land. It is most useful for new construction and special-purpose properties like schools or churches that rarely sell. Land is valued separately because land does not depreciate.
- Exam tip
- Formula: cost new minus depreciation plus land value. Remember that land is never depreciated.
- Example
- A building costs $400,000 to replace, has $50,000 in depreciation, and sits on land worth $100,000, giving a value of $450,000.
Related terms & state variants
Sources
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Last verified: 2026-10-23