The Cost Approach includes estimating the total cost new of the improvements. What is the first step?

In the Cost Approach, the first step involves estimating the value of the land as if it were vacant. This is a fundamental aspect because the Cost Approach operates on the premise that the value of a property is equal to the land value plus the cost of constructing improvements, minus any depreciation. By determining the land value first, the assessor sets a baseline for the overall valuation.

The rationale behind valuing the land as if it were vacant is to isolate the cost of improvements, allowing for an accurate calculation of the total value of the property. This estimation takes into account current market conditions, comparable sales, and inherent factors relating to the land itself, independent of the existing structures.

Estimating depreciation, accessory improvements, or conducting an overall market analysis would come after the land’s value has been established, as these factors are dependent on the initial land valuation to reach a complete picture of the property’s worth.