When using the Cost Approach, what does the appraiser typically consider regarding aging properties?

In the Cost Approach to property appraisal, the appraiser primarily focuses on evaluating the current replacement cost of the property and then considers the depreciation that may have occurred due to physical wear and tear, functional obsolescence, or economic obsolescence. This methodology is particularly relevant for aging properties, as it allows the appraiser to assess how the property's value has been impacted by age and condition.

The concept of replacement cost entails estimating how much it would cost to build a similar structure with equivalent utility, while depreciation assesses the loss in value that happens over time due to various factors, including age. By evaluating both aspects, the appraiser can arrive at a more accurate valuation reflecting the true worth of the property based on its current state and characteristics.

This approach is not influenced by future rental income, current sales prices of rentals, or immediate market demand, which are generally outside the scope of the Cost Approach. Instead, the focus is on the tangible costs associated with the property itself and the impacts of aging on its valuation.