Mortgage Glossary
Cost Approach
Defined by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
The cost approach is an appraisal method that estimates value as the cost to rebuild the structure new, minus depreciation, plus the land value.
What Cost Approach means
Appraisers use the cost approach mainly for new construction or unique properties with few comparable sales. It separates land value from improvement value and accounts for wear and obsolescence.
Florida example
An appraiser valued a newly built custom home in rural Florida with the cost approach, adding land value to construction cost since few comparable sales existed nearby.
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