Tim is using the cost approach to determine property value. Which property type is he most likely appraising?

The cost approach is particularly relevant and effective for appraising newly built properties, like newly constructed commercial buildings. This method estimates property value based on the cost to replace or reproduce the structure minus any depreciation.

For newly built commercial properties, this approach is advantageous because there are fewer variables involved in determining value; the cost of materials and construction is more straightforward, and often, depreciation is less of a factor since the building is new.

In contrast, the cost approach may be less effective for older properties or complex ownership structures like condominiums and cooperatives due to factors such as unique layouts, deteriorating conditions, and the influence of the surrounding market that can significantly affect their value. Additionally, older single-family residences may pose challenges in accurately estimating depreciation and replacement costs due to changes in building standards and market conditions over the years.

Thus, with its applicability to new constructions where values can be more easily calculated, the cost approach is indeed best suited for newly built commercial properties.