Which of the following is a common approach to valuing real estate?

The cost approach is a widely recognized and commonly used method for valuing real estate. This approach is based on the principle of substitution, which holds that a buyer would not pay more for a property than the cost to build a similar property with equivalent utility.

In the cost approach, the appraiser estimates the current cost to construct a replica of the subject property, taking into account various factors such as materials, labor, and overhead. After determining this construction cost, the appraiser will subtract any depreciation that has occurred due to physical wear and tear, functional obsolescence, or external factors. The final value is then established by adding the value of the land to the depreciated value of the improvements.

This method is especially useful for properties that are not frequently bought or sold or for new constructions where market data may be limited. It provides a strong basis for valuation in situations where comparable sales data may be unavailable.

In contrast, the other approaches listed, such as the profit approach, cash flow approach, and maintenance approach, are less conventional or specific to niche scenarios. The profit approach is not typically a standard method used in real estate appraisal. The cash flow approach refers more to investment analysis and valuation rather than a holistic property valuation method. The maintenance