The Cost Approach

Your friend owns an old Victorian home that is considered a historical site. He tells you that he just bought fire insurance that will cover loss to replace the home in case of a fire. He's not sure if the coverage limit will be enough, so he's asked your opinion about the situation. give your friend a recommendation as you tell him about the cost approach:

List the five basic steps in the cost approach.

Define the terms reproduction cost and replacement cost, and explain their use in appraisals.

Name four methods of estimating costs and explain when each is used.

List the direct and indirect costs that make up a building's total costs.

Name the important site, location, and design features that influence the construction costs of a building.

The Income Approach

Identify a property type that you think should be valued using the income approach.Discuss how you would use the income approach to appraise this property type:

List the six steps in the income approach to value.

Explain the use of gross income multipliers in the income approach.

Define the terms contract rent and market rent as used in appraisals.

Name the three main categories of expenses and give examples of items in each.

Outline the procedure used for reconstructing the owner's operating statement.