§15.9 - Cost Approach

• Jurisdiction: Washington

§15.9 COST APPROACH

A cost approach is one of three traditional approaches to valuation and is almost always used in developing a full market value appraisal of improved real estate. Sometimes it is not employed when the building improvements are fully depreciated and either add nothing to overall property value or are a burden to the land to the extent that demolition costs must be incurred to realize full market value of the land.

(1) In general

The cost approach may be the only approach to value used in an appraisal of use value, which is the value a specific property has for a specific use. In a full appraisal using the three traditional approaches to value, the cost approach is often used as a check of reasonableness of the values concluded by the other two approaches. In a feasibility study, the cost and market value relationship is all important.

The cost approach is most useful in valuation if:

(a)	The improved real estate is new and the cost of replacement, including land value, is demonstrable; or
(b)	When the improved real estate is single use and only has a value in use to an owner,

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