Question

An appraiser used the cost approach to estimate a property’s value at $220,000. The site value was $50,000 and the total depreciation estimate was $4,000. What was the estimated cost of improvements?

Answer 1

Answer:

$174000.

Explanation:

Given: Property value= $220000.

           Site value now = $50000

           Estimate depreciation= $4000.

Using cost approach to find the estimated cost of improvement.

The cost approach is method to estimated the value of property by adding value of land and depreciated value of improvement.

Formula; Cost of improvement= $Property\ value- New\ cost\ of\ site + Accumulated\ depreciation$

⇒ Cost of improvement= $\ 220000-\ 50000+\ 4000$

∴ Cost of improvement= $174000.