- May 17, 2009
- Professional Status
- Certified Residential Appraiser
As soon as the word "value" is used, to me it all goes back to the market because people decide on value. The cost approach doesn't exist in a vacuum, not if it's going to be relevant. From there, I suppose the underlying assumption of the cost approach is one of substitution, that the market won't pay more than the cost to construct. But anything beyond that I find troubling. Once I calculate depreciation, who's to say it has any accuracy in reflecting market reaction? Is the cost approach only relevant for new construction? Am I missing something?