Which method of property valuation estimates value based on the cost to replace it, minus depreciation?

The cost approach is the correct method of property valuation that estimates value based on the cost to replace the property, minus depreciation. This method involves calculating how much it would cost to construct a similar property using current materials and labor, then deducting any depreciation that the property has incurred over time. This approach is particularly useful for properties that are unique or not frequently sold, as it provides a more tangible basis for valuation rather than relying solely on market comparisons.

This method emphasizes the idea that a buyer will not pay more for a property than the cost to acquire land and build the property anew, minus any deterioration or obsolescence that has occurred. It’s often utilized for properties like schools, libraries, and government buildings where comparable sales data may be limited.

The other choices, such as contribution, conventional loan, and counteroffer, do not define a method of valuation based on replacement costs and depreciation, making them irrelevant in the context of this question. Understanding these distinctions helps clarify the methods and considerations surrounding property valuation in real estate.