Practice & MathQuestion 86 of 100
In the cost approach, the appraiser estimates value by:
a.Capitalizing the net operating income
b.Multiplying gross rent by a factor
c.Adding land value to the depreciated cost of improvements
d.Comparing only to foreclosure sales
Explanation
The cost approach estimates value as the cost to replace or reproduce the improvements, minus depreciation, plus the land value. It is especially useful for new, unique, or special-purpose properties. Depreciation accounts for physical, functional, and external loss in value.
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