Cost Approach to Property Valuation: Definition & Process


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question 1 of 3

The building cost of an existing property is $85,000. A similar house could be built for $30,000 on a piece of land that could be bought for $25,000. The appraiser estimates the existing property to have $20,000 worth of depreciation. What is the valuation price using the cost approach method?

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1. In which of these situations does the cost approach to property valuation work best?

2. The cost approach valuation of an existing house is $95,000. To purchase another lot of land nearby and build an identical house would cost $150,000. Which of the following may be true?

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About This Quiz & Worksheet

Assess your understanding of the cost approach to property valuation. The quiz will test you on things like calculating the valuation price and where the cost approach to property valuation is most effectively applied.

Quiz & Worksheet Goals

The worksheet and quiz will help you to:

  • Interpret a cost approach valuation scenario
  • Determine limitations of the cost approach to property valuation
  • Identify a central assumption of this method

Skills Practiced

These resources will help you to develop the following skills:

  • Critical thinking - apply relevant concepts to examine information about how cost approach is used in a different light
  • Interpreting information - verify that you can read information regarding the cost approach to property valuation and interpret it correctly
  • Information recall - access the knowledge you've gained regarding limitations to this approach

Additional Learning

Utilize the lesson called Cost Approach to Property Valuation: Definition & Process to find out more about this subject. The lesson will help you with the following study objectives:

  • Define cost approach
  • Assess how it can be calculated
  • Recognize the benefits of the cost approach