What is a key benefit of the cost approach?

A key benefit of the cost approach is that it can be applied in situations where there are limited or no comparable sales data available. This approach estimates the value of a property by calculating the cost to replace or reproduce the improvements on the property, minus any depreciation. This method is particularly useful for unique properties or new constructions where finding comparable sales might be challenging.

While other valuation methods may rely heavily on market activity and recent transactions, the cost approach provides a valid alternative that stands independent of market fluctuations, making it valuable in specific contexts, such as appraising specialized properties or when assessing properties in a market with few transactions. This flexibility is a significant advantage over methods that depend solely on comparable sales data.