What does the cost approach provide?

The cost approach provides a value indication that combines land and building costs. This method is particularly useful when valuing properties that have unique characteristics or when there are few comparable sales available. Under the cost approach, the assessor calculates the value of a property by determining the current cost to replace or reproduce the building (minus depreciation) and then adding the value of the land. This approach is practical for new constructions and specialized properties where the cost of replacement is more indicative of value than market comparisons or income generation.

While market values based on sales (first choice) and income-generating potential of properties (third choice) are valuable methods of valuation, they do not directly relate to the cost approach. Similarly, comparative value analysis (fourth choice) typically relies on market data rather than costs. These other methods focus on different aspects of market and investment analysis, while the cost approach is focused more on construction costs and tangible assets.