Property Valuation
The cost approach to appraisal estimates value as:
AThe present value of future income streams
BThe price that comparable properties have recently sold for
CThe land value plus the depreciated cost to replace or reproduce the improvements✓ Correct
DThe replacement cost of the building only, excluding land
Explanation
The cost approach formula is: Value = Land Value + Depreciated Cost of Improvements. First, estimate the land value as if vacant. Then estimate the cost to reproduce or replace the improvements at current costs. Then deduct accrued depreciation (physical deterioration, functional obsolescence, external/economic obsolescence). The cost approach is most reliable for new construction and unique properties with few comparable sales.
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