Georgia Appraiser Certification Practice Exam 2025 – Your Comprehensive All-in-One Guide to Success!

The Cost Approach directly correlates with construction costs because it focuses on determining the value of a property based on the current costs to construct a similar building, minus any depreciation. This approach involves estimating the replacement or reproduction cost of the improvements, which includes materials, labor, overhead, and profit. After calculating this cost, appraisers subtract depreciation, which accounts for obsolescence, wear and tear, and market fluctuations.

This method is particularly useful for valuing new constructions or unique properties where market data may be limited and also provides a way to estimate value based on physical characteristics rather than relying solely on sales or income data. Other approaches, like the Sales Comparison Approach or Income Approach, do not directly measure construction costs but rather derive value based on market transactions or potential income generation, which may not be precise indicators of a property's physical construction value.