Using the cost approach, an appraiser would do which of the following?

The cost approach to property valuation involves determining the current cost to replace or reproduce the property, then subtracting any depreciation that has occurred since the property was built or last renovated. This method is particularly effective for properties that are unique or not often sold on the open market, such as specialized commercial buildings, or for new constructions where comparable sales data may be limited.

Using replacement cost minus depreciation aligns with the fundamental principles of the cost approach. The appraiser assesses how much it would cost to construct a similar property today and then accounts for the wear and tear, obsolescence, or functional limitations that could decrease the property's value over time. This calculation helps to derive an accurate estimate of the property's market value based on the costs involved in creating it anew.

While adjustments for economic conditions, consideration of comparable properties, and property income potential are important in other appraisal methods, they are not central to the cost approach. Economic adjustments pertain to market trends and sales data typically found in the sales comparison approach; using comparables is a core element of that method; and income potential is primarily relevant in the income approach used for investment properties. Each of these aspects can inform an appraisal, but they do not directly relate to the mechanics of the cost approach.