2025-009 Ordinance - Laserfiche WebLink

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Cost Approach to Value In the Cost Approach, the value of a property is derived by adding the appraiser's opinion of the value of the land to an estimated current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation (i.e., deterioration and obsolescence) in the structures from all causes. This approach is particularly useful in valuing new or nearly new improvements and properties that we not frequently exchanged in the market21 The Cost Approach is defined as, "A set of procedures through which a value indication is derived for the fee simple estate by estimating the cost new as of the effective date of the appraisal to construct a reproduction or (or replacement for) the existing structure, including an entrepreneurial incentive; deducting depreciation from the total cost; and adding the estimated land value. The contributory value of any site improvements that have not already been considered in the total cost can be added on a depreciated -cost basis. Adjustments may then be made to the indicated value of the fee simple estate in the subject property to reflect the value of the property interest being appraised.u" The procedure involved in arriving at an indication of value via a Cost Approach analysis is briefly explained as follows: I. The underlying site is valued as if vacant and available for development in its highest and best use. 2. 'Me reproduction cost of the building is estimated as of the date of valuation. 3. 'Ihe overall accrued depreciation of the buildings is estimated, reflecting all depreciation and obsolescence factors, both curable and incurable. 4. 1 h depreciated contributory value of the supporting site improvements is estimated; 5. The various elements of value as listed above are summarized to yield an indication of value via the Cost Approach as follows: Value of the site plus the reproduction cost less accrued depreciation, plus the depreciated contributory value of the site improvements. The cost approach is not applicable in the appraisal of the subject property because it is not improved. 29 C. P. n12AMAN & CO., INC. -acel I!sluk AVPmisuly & Cunsvaina www. cpbco..