Real Estate Appraisal Report - 1984

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THE COST APPROACH One method of estimating the replacement cost of a building is the use of a National Cost Service. We have used the Marshall Valuation Service., which is compiled and published by Marshall and Swift Publications Company. The cost data presented is based on years of valuation experience, thou- sands of appraisals and continuous analysis of the cost of new buildings . This publication has been nationally recog- nized as an authority in the appraisal field. over thirty- five years and covers 50 states and Canada. Current cost multipliers are furnished to keep costs up to date by monthly supplements and revised pa es in each of three districts (Eastern, Central, Western and local modi- fiers convert the costs to specific localities . Depreciation, if any, must also be recognized in arriving at a 'value" of improved property. In real estate, depreciation usually results from one or more of three sources . These sources are known as physical deterioration, functional de- preciation and environmental depreciation. Physical depreciation is generally considered to be wear and tear of the building due to age or from sources which cause the building to wear out. Functional depreciation is obso- lescence in the building due to layout, design, use of material, etc. Economic depreciation or obsolescence is a reduction in value of the total real estate caused by factors outside the property itself ; i.e. , from proximity to other properties which create depreciation in the subject property. In the case of a new or proposed building there will be, of course, no physical depreciation. Also, a prudent and informed person should not normally"build in" functional or economic depreciation.