Basic Appraisal Procedures- Cost Approach Cost Est
Institution
Basic Appraisal Procedures- Cost Approach Cost Est
Basic Appraisal Procedures- Cost Approach Cost Estimating Review Questions with Complete Solutions
Substitution - Answers The basic principle in the cost approach.
Cost approach formula - Answers Reproduction or replacement cost new
Less accrued depreciation + site value = Property Value
Cost ...
Substitution - Answers The basic principle in the cost approach.
Cost approach formula - Answers Reproduction or replacement cost new
Less accrued depreciation + site value = Property Value
Cost approach - Answers Which approach is the oldest of the traditional approaches?
True - Answers If appraising something other than fee simple interest, an appraiser can make an
adjustment to the indicated value by cost approach in order to reflect the value of the property being
appraised.
The subject is a special purpose property - Answers The cost approach would be most applicable when?
Whenever it is necessary to produce credible assignment results - Answers When is an appraiser
required by USPAP to develop the cost approach?
False - Answers The cost approach is most applicable in situations where the site value is not well-
supported.
Direct Costs
Indirect Costs
Entrepreneurial incentive - Answers All cost estimates to be used in the cost approach need these 3
basic ingredients:
Direct costs - Answers Hard costs; labor and material
Indirect costs - Answers Soft costs; administrative, professional fees, financing and interest, taxes,
marketing, etc
Entrepreneurial incentives - Answers The amount an investor expects to receive for his contribution to a
project
Cost approach - Answers A set of procedures through which a value indication is derived for the fee
simple interest in a property by estimating the current cost to construct a reproduction of (or
replacement for) the existing structure.
Reproduction cost - Answers The estimated cost to construct, at current prices as of the effective date of
the appraisal, an exact duplicate or replica of the building being appraised; using the same materials,
construction standards, design, layout, and quality of workmanship and embodying all the deficiencies,
superadequacies, and obsolescence of the subject building.
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