What is the primary focus of the Cost Approach in appraisal?

The primary focus of the Cost Approach in appraisal revolves around determining the value of a property based on the cost to replace or reproduce the improvements on the site, while factoring in depreciation. This method calculates the current cost to construct a similar building, minus depreciation based on the wear and tear, age, and obsolescence of the property. It is particularly useful for properties that are specialized, unique, or do not frequently transact in the market, such as schools or churches, where historical sales data may not be readily available or relevant.

In this approach, the appraiser assesses the land value separately and then adds it to the calculated depreciated cost of improvements. This makes it an essential tool for establishing the fair market value of a property based on physical characteristics and construction estimates, rather than relying solely on market sales data or income potential, which are key considerations in other appraisal methods.