Cost approach

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Cost approach is a real estate appraisal valuation method used to price an individual property.^[1] It is one of three methods, the others being market approach, or sales comparison approach, and income approach. The fundamental premise of the cost approach is that a potential user of real estate will not, or should not, pay more for a property than it would cost to build an equivalent. The cost of construction minus depreciation, plus land, therefore is a limit, or at least a metric, of market value.