Cost approach in real estate

The cost approach in real estate valuation estimates a property's value by calculating how much it would cost to replace or reproduce the building from scratch, minus depreciation for age and wear, and then adding the land's value. It's based on the idea that a buyer wouldn't pay more than the cost to create an equivalent property, ensuring the price reflects replacement costs, especially useful for newer or unique properties where comparable sales are limited. This method provides an objective estimate of a property's worth by focusing on construction costs and land value.