Sylvan is using the cost approach to estimate a specific property's value. What's he using to determine this property's value?

Sylvan is using the cost approach to estimate a specific property's value. What's he using to determine this property's value?

• A. The Average Value of Similar Construction Across the Country
• B. The Cost to Acquire the Land and Construct a Reproduction of the Structures on the Property
• C. The Expenses the Property is Expected to Produce for the Owner
• D. The Income the Property Will Make Annually

Answer: (B)

The cost approach estimates value based on what it would cost to recreate or replace the property, including the land, and then adjust for depreciation. In this method, you determine value by calculating the cost to acquire the land and construct a reproduction of the existing structures (or their replacement cost) and then account for any depreciation. This is why the correct idea is the cost to acquire the land and build a reproduction of the structures on the property. Other approaches rely on different data: using the value of similar construction across the country reflects a market data or sales comparison method; focusing on the expenses the property is expected to produce or the income it will generate corresponds to the income approach.

The cost approach estimates value based on what it would cost to recreate or replace the property, including the land, and then adjust for depreciation. In this method, you determine value by calculating the cost to acquire the land and construct a reproduction of the existing structures (or their replacement cost) and then account for any depreciation. This is why the correct idea is the cost to acquire the land and build a reproduction of the structures on the property.

Other approaches rely on different data: using the value of similar construction across the country reflects a market data or sales comparison method; focusing on the expenses the property is expected to produce or the income it will generate corresponds to the income approach.