What is the appraisal approach that uses replacement cost less depreciation, added to land value?

The appraisal approach that utilizes replacement cost less depreciation, combined with land value, is known as the cost approach. This method calculates the value of a property by determining how much it would cost to replace the structure (i.e., the improvements) on the land, and then subtracting any depreciation that has occurred. This calculation is essential because it reflects the current cost of creating a similar structure and accounts for any wear and tear or functional obsolescence that might affect the property's value.

In addition, the cost approach includes the value of the land itself, which is an integral part of the overall valuation. It is particularly useful in situations where there are few comparables available, such as unique properties or newly constructed buildings. This method helps in estimating the value based on what it would cost to recreate the property, making it very relevant for appraisers considering properties that may not have an active market.

Understanding this approach enhances an appraiser's ability to assess value accurately, especially in cases where other methods, such as the income or market value approaches, may not provide a clear picture due to insufficient data or unique property characteristics.