What is the initial step in the Cost Approach?

The initial step in the Cost Approach involves estimating site value as if vacant. This is essential because the cost approach seeks to establish the value of a property based on the cost to replace or reproduce it, while also taking into account the value of the site itself. When appraising a property, it is crucial to determine how much the land would be worth independent of any structures that may be on it.

By estimating the site value as if vacant, appraisers can then base their calculations on the premise that the land is the foundation upon which any improvements are made. Once the site value is established, appraisers can proceed to estimate the replacement cost of improvements, add that to the assessed land value, and then consider depreciation, ultimately allowing for a comprehensive value assessment of the entire property. This initial valuation of the site lays the groundwork for subsequent evaluations and calculations in the Cost Approach framework.