Which appraisal method evaluates the property based on its replacement cost?

The appraisal method that evaluates property based on its replacement cost is the Cost Approach. This approach determines the value of a property by calculating the cost to replace or reproduce the building, accounting for depreciation and adding the value of the land. It is particularly useful for properties that are not frequently sold or for unique properties, where comparable sales data might be scarce.

In the Cost Approach, appraisers assess how much it would cost to build a similar structure with the same utility, allowing for adjustments for wear and tear or obsolescence. This method provides a clear understanding of the intrinsic value of a property based on its physical characteristics and contributes to accurate valuations, especially in determining the worth of newer or less common properties.

This method stands apart from approaches such as the Income Approach, which focuses on the potential income a property can generate, and the Sales Comparison Approach, which bases value on recent sales of comparable properties. While the Market Value Approach is often used in real estate transactions, the Cost Approach specifically concentrates on replacing value, which is why it is the correct choice in this context.