Cost Approach
An appraisal method that adds land value to the depreciated cost to replace the improvements. It fits new or special-purpose buildings.
Quick flashcard
What does Cost Approach mean on the Texas real estate exam?
Answer: An appraisal method that adds land value to the depreciated cost to replace the improvements. It fits new or special-purpose buildings.
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Cost Approach definition
The cost approach estimates value by figuring the current cost to build the improvements, subtracting accrued depreciation, and adding the value of the land. The formula is land value plus replacement cost minus depreciation.
It is most reliable for new, unique, or special-purpose buildings such as churches, schools, and government buildings, where comparable sales and income data are limited.
Source basis
Definition checked against the official sources below on .
On the exam
Exam trap
Tested in
Value & Appraisal (11 of 80 National)
From definition to recall
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