What does the term 'cost approach' primarily focus on in property valuation?

The term 'cost approach' in property valuation primarily focuses on determining the value of a property based on the cost of replacing or reproducing it. This method involves estimating the total costs involved in construction, including materials, labor, and overhead, and then adjusting for depreciation to arrive at the property's current value.

This approach is particularly useful for properties that do not frequently sell in the open market or for unique properties such as schools or churches, where comparable sales are limited. The underlying assumption is that a buyer would not pay more for a property than what it would cost to create a similar one. By emphasizing the costs involved in replacing or reproducing the property, appraisers can derive a value that reflects the current state and potential future value of the property based on its physical condition and the materials used.