What is the typical use for a cost appraisal?

A cost appraisal is primarily used for newly constructed properties, as this type of appraisal evaluates the cost to replace or reproduce a property. This method considers the expenses involved in construction, including labor, materials, and overhead, to determine the property's value. The cost approach is especially relevant for new constructions where there are no existing comparable sales, allowing appraisers to provide an accurate assessment based on current construction costs, rather than relying solely on market data.

While cost appraisals can be applied in various circumstances, including properties needing renovation, distressed properties, and vacant land assessments, their main purpose is to ascertain the value of a newly constructed property. In such cases, the cost appraisal method serves as an effective way to establish a baseline value that reflects the expenses incurred in the property’s creation.