In the cost approach, what do appraisers typically estimate first?

In the cost approach to property appraisal, appraisers typically begin by estimating the replacement or reproduction costs of the improvements on the property. This estimation is crucial because it serves as the foundation for determining the overall value of the property. By calculating the cost to replace the existing structure with a new one of similar utility and quality, appraisers are able to establish a baseline value.

Once the replacement cost is determined, appraisers will then consider factors such as depreciation and the value of the land to arrive at the final appraised value. This initial step is vital because understanding the cost to construct the improvements allows for a more accurate assessment of value in relation to the market and the property's current condition. Thus, estimating the replacement or reproduction costs first is essential for the integrity of the cost approach.