Calculate the total property value using the cost approach.
Building Dimensions & Cost
Building Width (ft)
Building Depth (ft)
Number of Stories
Cost Per Square Foot
Local Cost Multiplier
Current Cost Multiplier
Entrepreneurial Incentive
Site Improvements (Depreciated Value)
Depreciation
Effective Age
Remaining Economic Life
Land
Land Size (Acres)
Land Value (per Square Foot)
Final Answer
Total Property Value
Step-by-step solution
Visual Exhibit
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Appraisal Toolbox
The Cost Approach
The cost approach estimates value by summing the site value, the cost to construct the improvements as if new, and the contributory value of site improvements, then deducting all forms of accrued depreciation from the improvements.
The general formula is: Site Value + Cost of Improvements New + Site Improvements − Accrued Depreciation = Indicated Value. Each component is supported by independent market evidence.
The approach is most reliable for newer properties and special-purpose buildings where comparable sales are limited. The reliability of the cost approach declines for older buildings as accrued depreciation becomes harder to estimate accurately.
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Video Explanation Available
Visit our YouTube channel for a brief video presentation of the cost approach.
Solution Roadmap
Flowchart for Solving This Cost Approach Problem
1 · Size, Cost New & EI
Build up to total cost: footprint → bldg SF → base cost → apply local & current multipliers → add EI.
2 · Apply Depreciation
Use age-life to derive depreciation %, then subtract from total cost to get the depreciated value of improvements.
3 · Add Site Improvements + Land
Add the site improvements (already depreciated). Compute land value: acres × 43,560 × $/SF.
4 · Sum to Get Property Value
Total property value = depreciated improvements + site improvements + land value.
Bottom line: The trick with this problem is the two cost multipliers (local & current). Apply both before adding EI, then proceed normally with depreciation, site improvements, and land.