What does the Cost Approach indicate about property value?

The Cost Approach indicates that property value is assessed by calculating the value of the land, or site value, and then adding the cost of any improvements made to that land, while subtracting any depreciation that those improvements may have incurred over time. This method is particularly useful for properties that are not frequently sold or where there are not many comparable sales available. It applies a straightforward logic: the value of a property should reflect what it would cost to replace it, minus depreciation, hence ensuring that both the land and the investment made on it are accurately represented in the total property value.

In the context of real estate appraisals, this approach is often used for new constructions or unique properties where market comparisons may be difficult. It highlights the importance of not just the land itself but also the enhancements made to it, providing a comprehensive picture of overall property value that reflects both the portion of the value derived from the land and the investments put into it.