Definition
A property valuation method calculating what it would cost to rebuild the structure from scratch, minus depreciation, plus land value. Useful for unique properties where comparable sales are scarce, like that missile silo you're converting into a home.
Example Usage
The appraiser used the cost approach for the custom-built passive house since no comparable sales existed in the rural area.
Origin
Appraisal methodology formalized in early 20th century professional standards
Fun Fact
The cost approach is particularly important for insurance purposes, as it determines replacement cost rather than market value.
Source: Appraisal Institute valuation standards
Related Terms
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