What type of value is primarily assessed using the cost approach?

The cost approach primarily assesses the insurable value of a property because it focuses on determining the current cost to replace or reproduce the improvements on the property, minus any depreciation. This approach is most relevant for properties that are new or properties that do not frequently change hands, making it less applicable for assessing market value directly.

The insurable value refers to the amount needed to replace a property in case of damage or loss, which aligns with the calculations made in the cost approach. This method typically involves estimating the cost of construction at current prices and adjusting for depreciation, thereby giving an accurate reflection of what it would cost to insure the property.

In contrast, market value is derived from recent sales of comparable properties and is influenced by supply and demand dynamics in the real estate market. Investment value pertains to the worth of a property to a specific investor based on their financing and investment criteria, while liquidation value refers to the quick sale of a property at a price below market value. These concepts do not focus on replacement costs and depreciation, which are central to the insurable value determined through the cost approach.