Approaches to value
Cost approach
Land value plus the cost to build the improvements new, minus depreciation
Land is valued separately as though vacant, the improvements are costed at replacement or reproduction cost, accrued depreciation from every source is deducted, and the two are added. Land itself is never depreciated.
How the exam asks about it
Most reliable for new construction and for special-purpose property — schools, churches, libraries — where there are neither comparable sales nor a rental market.
Related terms
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