Steps in the Approach

Steps in the ApproachFirst, the appraiser estimates the value of the land as if it were vacant, typically using the sales comparison method. Next, they calculate the cost to build the structure new. It’s important to distinguish between Reproduction Cost (building an exact duplicate or replica, often used for historic homes) and Replacement Cost (building a structure with similar utility using modern materials, used for most insurance and appraisal work). A common way to estimate this is the comparative square-foot method, multiplying the cost per square foot of recently built similar structures by the subject’s square footage.