Skip navigation
 
 

What is the Cost Approach?

The cost approach to value combines an estimate of land value with an estimate of depreciated reproduction or replacement cost of the improvements.

The principle of substitution is the basis of the cost approach. The theory of this principle is that no rational person will pay more for a property than the amount for which they can obtain, by purchase of a site and construction of a building, a property of similar desirability and utility.