What does the "cost per square foot" method involve?

The "cost per square foot" method involves calculating value by determining a per-square-foot cost based on recent sales of similar properties. This approach is often used in real estate appraisal to provide a standardized assessment of property value, allowing appraisers to compare properties more effectively. By analyzing the sale prices of comparable properties and dividing those prices by their respective square footage, appraisers can derive an average cost per square foot. This figure can then be applied to the subject property to estimate its market value, offering a relevant benchmark that reflects current market conditions.

The other options present different aspects of real estate analysis but do not relate to the cost per square foot method. For example, estimating total renovation costs is focused on the potential expenses for improving a property rather than its market value based on comparisons. Identifying selling prices over the past year may provide historical data but doesn't specifically calculate value on a per-square-foot basis. Similarly, calculating average rental income pertains to income-producing properties and is utilized in different valuation methods, such as the income approach, rather than the cost per square foot analysis.