What is the cost approach in property assessment?

The cost approach estimates value as replacement cost minus depreciation plus land. IAAO treats it as one of the three approaches to value, based on substitution: a buyer would not pay more than the cost of a like building on a like lot.

What is the cost approach formula?

Replacement cost new minus depreciation plus land value. A $150,000 replacement cost minus $20,000 of depreciation plus $70,000 of land prints as $200,000. That labeled example shows the sequence, not a live county worksheet.

Is the cost approach the only method a property tax appeal can argue?

The cost approach is not the only method. Sales comparison and the income approach are the other two traditional paths. A property tax appeal is aimed at the printed assessed value, whichever approach the county used to write it.

What Is the Cost Approach in a Property Assessment?

The cost approach estimates value as replacement cost minus depreciation plus land. It is one of the three approaches assessors use, not a DIY appraisal lesson.

The cost approach in property assessment estimates value as replacement cost minus depreciation plus land, one of the three traditional approaches to value. The idea is substitution: a buyer would not pay more than the cost of a like building on a like lot. This page names the formula. It is not a lesson in running an appraisal.

How does the cost approach calculate property value?

The formula is replacement cost new minus depreciation plus land value. The IAAO glossary states that sequence and treats the cost approach as one of the three approaches to value. IAAO's Standard on Mass Appraisal says the cost approach can apply to virtually all improved parcels. Land is usually a separate step.

Example: $150,000 replacement cost minus $20,000 depreciation plus $70,000 land equals $200,000. That walkthrough is an example, not a contractor's bid.

Look up if you are overpaying.

Does a property tax appeal have to use the cost approach?

No. A property tax appeal challenges the printed number, however the county built it. Cost is one path. Sales comparison and income are the other two. The property tax glossary keeps those three labeled. FairAppeal reviews your property and decides whether to file, and there are no upfront costs with Fair Appeal.

Frequently asked questions

What is the cost approach in property assessment?: The cost approach estimates value as replacement cost minus depreciation plus land. IAAO treats it as one of the three approaches to value, based on substitution: a buyer would not pay more than the cost of a like building on a like lot.
What is the cost approach formula?: Replacement cost new minus depreciation plus land value. A $150,000 replacement cost minus $20,000 of depreciation plus $70,000 of land prints as $200,000. That labeled example shows the sequence, not a live county worksheet.
Is the cost approach the only method a property tax appeal can argue?: The cost approach is not the only method. Sales comparison and the income approach are the other two traditional paths. A property tax appeal is aimed at the printed assessed value, whichever approach the county used to write it.