In what scenario would the "cost approach" be primarily used?

The cost approach is primarily used when appraising a newly constructed property because this method focuses on determining the cost to replace or reproduce the property, rather than relying on comparative market analysis. In the case of new constructions, the property is typically unique, meaning there may not be enough comparable sales data available to conduct a market comparison effectively. By estimating the cost of constructing the property from scratch and adjusting for depreciation, appraisers can arrive at a value that reflects what it would cost to build a similar structure today.

This approach is particularly valuable for new properties since they usually have few to no upgrades or updates that would complicate the valuation. It allows appraisers to assess the value based on current construction costs, labor, and materials. Additionally, the cost approach can provide useful insights to builders, developers, and lenders concerned with financing new construction projects.