Property Valuation
When using the cost approach to value a Pennsylvania property, the formula is:
ASale Price minus Commission equals Net Value
BReplacement Cost New minus Depreciation plus Land Value equals Property Value✓ Correct
CNOI divided by Cap Rate equals Property Value
DAssessed Value times Common Level Ratio equals Market Value
Explanation
The cost approach formula is: Replacement Cost New minus Accrued Depreciation plus Land Value equals Indicated Value. The cost approach is most reliable for new or newer construction (minimal depreciation), special-purpose properties (churches, schools) with few comparable sales, and insurance valuation. Land value is estimated separately using comparable land sales. Depreciation includes physical deterioration, functional obsolescence, and external obsolescence. The cost approach is one of three approaches used by Pennsylvania appraisers.
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