According to Use Property Type Classification Codes will be noted, but not used for analysis. The market approach uses market sales of properties similar to the subject. The cost approach uses current replacement or reproduction cost to estimate market value. Replacement cost is the amount of money necessary to build a new building equal in utility and functionality to the original. The value is calculated by estimating replacement cost, deducting depreciation, and adding the value of the land.
Depreciation is an estimate of loss in value from any cause.
The typical factors influencing depreciation are age, physical condition, and functionality. The income approach uses potential income of a property to calculate market value. This approach is most applicable for those properties bought and sold for their income producing capabilities. This approach considers the income stream that a property is likely to produce and capitalizes the future benefits of ownership into current market value. Single family homes are not typically bought and sold for their income producing capabilities, therefore the income approach is not normally used.