The Cost Approach

Front 1

Carrying charges

Back 1

expenses during lease-up or sell out including commissions, cost of capital, etc.

Front 2

Contractor's profit

Back 2

money paid to coordinate the subcontractors &/or construction of improvements

Front 3

Cost approach

Back 3

one of the 3 approaches to value where cost minus depreciation plus site value = value

Front 4

Cost estimate

Back 4

estimate of money necessary to build an improvement as of a given date

Front 5

Curable depreciation

Back 5

items that should be corrected or replaced as of the appraisal date

Front 6

Depreciated cost

Back 6

value of the improvements by subtracting depreciation from cost

Front 7

Depreciation

Back 7

difference between cost and value

Front 8

Direct costs (hard costs)

Back 8

money for labor & materials, including contractor's profit

Front 9

Entrepreneurial incentive (profit)

Back 9

money necessary to cause improvements to be built over and above direct & indirect costs

Front 10

External obsolescence

Back 10

loss in value from outside causes

Front 11

Feasibility study

Back 11

a study used to determine if a particular use should be developed or to select among alternative uses

Front 12

Functional obsolescence

Back 12

loss in value in the improvements from other than wear & tear; includes outdated items, superadequacies, deficiencies, poor layout, design, etc.

Front 13

Functional utility

Back 13

the ability of improvements to meet market required uses

Front 14

Incurable depreciation

Back 14

loss in value in the improvements from items that are not economically justified to correct or replace

Front 15

Indirect costs (soft costs)

Back 15

costs other than direct and profit attributable to building; includes architectural, interest, loan fees, money for lease-up, professional fees, etc.

Front 16

Physical depreciation

Back 16

loss in value due to wear & tear

Front 17

Replacement cost

Back 17

cost to build same functional utility at current workmanship & materials

Front 18

Reproduction cost

Back 18

cost to build a duplicate

Front 19

Stabilized occupancy

Back 19

occupancy at expected supply & demand stabilization or when the improvements are expected to remain occupied

Front 20

Appraisal principles

Back 20

1. Substitution
2. S & D
3. Balance
4. Externalities
5. HBU