Which method is best suited for determining the market value of new construction?

The method best suited for determining the market value of new construction is cost analysis. This approach involves estimating the costs associated with building a new property, which includes assessing both direct costs, such as labor and materials, and indirect costs, like permits and financing. By determining the total cost to construct the building and considering the depreciation and potential return on investment, an appraiser can establish a value that reflects the true worth of the new construction in its current market context.

Cost analysis focuses specifically on the attributes and expenses related to the built structure, making it particularly useful for new properties where comparable sales might not yet exist or may not reflect the unique features of the new construction accurately. This method provides a detailed approach to understanding what it would cost to replicate the property, allowing for a well-informed market value assessment even in the absence of established market comparables.

While factors such as allocation, extrapolation, and sales comparison methods serve important purposes in other contexts, they do not provide the same level of insight into the inherent value of new construction properties. Allocation typically deals with distributing a single value among multiple components, extrapolation relies on projecting data from existing properties, and sales comparison focuses on evaluating properties that are similar and already present in the market rather than newly constructed