In the index method, what does the appraiser divide by to calculate the index factor?

In the index method of appraisal, the appraiser calculates the index factor by dividing a certain property’s value by the corresponding present cost index. This process allows the appraiser to adjust for changes in market conditions and construction costs over time. The present cost index reflects current costs as opposed to historical costs, which helps in determining the appropriate value of a property based on more current economic conditions. By using this index, appraisers can effectively estimate the value of properties adjusted for inflation and other market variances.

Other options, while possibly relevant to various appraisal methodologies, do not serve the purpose of calculating the index factor in the context of the index method. For instance, estimating accrued depreciation is focused on a property’s loss of value over time, whereas the listing price is more about market perception than an actual cost adjustment critical to this specific calculation. Site value pertains more to the land aspect of a property rather than the adjustments needed for a property's overall valuation. Thus, the choice of present cost index is central to accurately deriving the index factor in the appraisal process.