Cost Approach

Name(s)

Cost Approach

In the Cost Approach, the estimate of replacement cost new will be discussed first and after that, the various types of depreciation will be defined and estimated. This approach will conclude with the calculation of the market value estimate, totaling the direct and indirect replacement cost new, depreciation deductions, and land value.

Replacement Cost New

Definition and steps taken to drive

Direct and Indirect Costs

Definition and calculation

Entrepreneurial Incentive

Definition.

Indication of % and support

Calculation

Total Replacement Cost New

Calculation

Depreciation

Explain what depreciation is and the different methods to derive

Market Extraction Method

Definition and steps taken to derive.

Calculation

Final opinion of depreciation %, why, and which comparables were given most weight and why

Breakdown Allocation Method

The breakdown allocation method separates total depreciation into its three component parts: physical deterioration, functional obsolescence and external obsolescence.

Total Physical Deterioration

Identify depreciation % and how you derived this estimate

Calculation

Curable Physical Deterioration:

Definition and Calculation

Incurable Physical Deterioration – Short-Lived:

Definition and calculation

Incurable Physical Deterioration – Long-Lived:

Definition and calculation

Functional Obsolescence

Functional obsolescence is defined as a flaw in the structure, materials or design of an improvement.

Curable Functional Obsolescence: Definition and explanation of this obsolescence at the subject, if any.

Incurable Functional Obsolescence: Definition and explanation of this obsolescence at the subject, if any

External Obsolescence: Definition and explanation of this obsolescence at the subject, if any

Land Value

Sentence as to why you are including the land value here

Calculation

Value Conclusion by the Cost Approach

By combining all elements set forth above with our land value conclusion, the total value indication by the cost approach as shown in the table below.

Summary total calculation

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