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Valuation and Analysis, 14% of the examination

Cost approach

A valuation method adding land value to replacement or reproduction cost new, less accrued depreciation.

The core formula is land value plus improvement cost new minus depreciation. It is especially useful for newer or special-purpose properties with limited comparable sales, and less persuasive for older properties when depreciation is difficult to measure.

See also

Depreciation in appraisalLoss in value from physical deterioration, functional obsolescence, or external obsolescence.ReconciliationThe appraiser's reasoned weighting of applicable value indications into a final opinion of value.

Test the distinction

A relevant question from Valuation and Analysis, selected because its facts or explanation use this concept.

Valuation and Analysis ยท 14%Methods of Estimating Value

Which appraisal approach begins with the cost to build new and then subtracts depreciation?

Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanor under B&P Code section 123.

Primary sources

Use these authorities when a course summary, forum answer, or older flashcard conflicts with the current California rule.

Where this is tested

Property Valuation and Financial AnalysisAll three official DRE valuation topics in one practical guide: value principles, the sales comparison, cost and income approaches, and the financial analysis that turns property data into a defensible answer.14%Practice Valuation and Analysis28 questions on this area, every option explained.Practice

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