In which scenario would an appraiser be required to use the cost approach as a valuation method?

The cost approach is particularly useful when appraising a brand-new property without comparable sales because it provides a clear method to determine the value based on the cost to construct the building and improvements, minus any depreciation. In cases where there are no recent comparable sales data available to establish a market value, the cost approach allows appraisers to calculate an estimated value based on the current costs of materials, labor, and land, paying particular attention to the replacement or reproduction cost of the property.

In the context of the choices, while the cost approach may also be applicable in scenarios involving unique features or functional obsolescence, these situations typically allow for consideration of comparable sales data as well. Conversely, a newly constructed property, especially one where there are no adequate comparable sales to assess value accurately, makes the cost approach the most direct and reliable valuation method.