Which of the following is the first step in the Cost Approach?

The first step in the Cost Approach is to estimate the cost to replace all improvements on the property. This method is primarily used in situations where properties are unique or where there are few comparables available, such as public buildings or special use properties.

In this approach, the appraiser first calculates the total current cost to rebuild the structures on the property, which includes labor and material costs, adjusted for inflation and other factors. This step is crucial because it establishes a baseline value for the property by outlining what it would cost to recreate it from the ground up.

Once the cost of improvements is determined, appraisers typically proceed to assess the land value and account for depreciation of the existing improvements, but these come after establishing the initial cost of replacement. This systematic approach helps ensure that each component is accurately considered in determining the overall value of the property.