Which appraisal method focuses on the cost to replace the property?

The correct answer is the Cost approach because this appraisal method specifically estimates the value of a property based on the cost to replace or reproduce it. The process involves calculating the current cost of constructing a similar building using modern materials and techniques, then adjusting for depreciation based on the property’s age, condition, and any functional or external obsolescence.

This method is particularly useful for new constructions or properties that do not have sufficient comparable sales data available, making it an effective choice to determine the value of specialized or unique properties. The Cost approach is grounded in the principle that a buyer will not pay more for a property than the cost of constructing a similar one, assuming that no economic factors distort the market.

In contrast, the Income approach focuses on the potential income generation of an investment property, using capitalization rates to determine value based on expected returns. The Sales comparison approach relies on comparing the subject property to similar properties that have recently sold in the area, making it less relevant when the focus is purely on replacement costs. Lastly, the Market analysis approach encompasses a broader examination of the market trends and conditions rather than focusing solely on cost factors.