On what does the "cost approach" to appraisal primarily rely?

The cost approach to appraisal primarily relies on the cost to replace or reproduce the improvements on a property, minus any depreciation. This method involves calculating the total cost to construct a similar structure at current prices, considering both the land value and the cost of improvements. By deducting the depreciation, which accounts for physical wear and tear, functional obsolescence, or economic obsolescence, appraisers arrive at a value that reflects the actual worth of the property based on the costs associated with its construction.

This approach is particularly useful for new properties or unique structures where market data may be limited. It provides an accurate assessment in situations where properties are not frequently sold or do not generate distinct income streams, making the income and market approaches less applicable.