Cost approach

Valuation method in real estate appraisal

Cost approach is a real estate appraisal valuation method used to price an individual property. It is one of three methods, the others being market approach, or sales comparison approach, and income approach. The fundamental premise of the cost approach is that a potential user of real estate will not, or should not, pay more for a property than it would cost to build an equivalent. The cost of construction minus depreciation, plus land, therefore is a limit, or at least a metric, of market value.

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