California · Chapter 21 of 59
Cost Approach
Used for new construction and unique properties. Reproduction vs. replacement cost, depreciation types.
25-minute read · Built for the DRE Salesperson Exam
cost approachreproduction costreplacement costphysical deteriorationfunctional obsolescenceexternal obsolescence
When It's Used
The cost approach estimates value by calculating the cost to build an equivalent structure new, less depreciation, plus the land value. Best for: newly constructed properties, special-purpose properties (churches, schools), unique properties without good comparables. Formula: Land Value + Cost to Build New - Depreciation = Estimated Value.
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