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D. THE THREE APPROACHES TO VALUE <br /> In order to arrive at an accurate estimate of value, three <br /> basic approaches, or techniques, are traditionally used by <br /> appraisers: the market data approach, the cost approach, <br /> and the income approach. Each method serves as a check <br /> against the others and narrows the range within which the <br /> final estimate of value will fall. <br /> 1. COST APPROACH <br /> The cost approach is based on the principle of <br /> substitution, which states that the maximum value of a <br /> property tends to be set by the cost of acquiring an <br /> equally desirable and valuable substitute property, <br /> assuming that no costly delay is encountered in making <br /> the substitution. <br /> In this approach the value contribution of improvements <br /> (as indicated from all pertinent considerations) , is <br /> translated into easily understandable units of <br /> comparison such as square or cubic feet, and <br /> incorporated into a schedule of values as reflected in <br /> this manual. Once established and adopted, this <br /> schedule of values is used to determine improvement <br /> replacement/ reproduction cost estimates from which <br /> are deducted appropriate allowances of a depreciation <br /> (from all causes) . This procedure results in an <br /> estimate of improvement value to which is added <br /> land value (as determined from the appropriate land <br /> value schedule) . <br /> Estimating Cost <br /> The principle sources for obtaining cost data are <br /> builders and developers, and it is generally advisable <br /> to collect cost data in conjunction with new <br /> construction. (The Marshall Valuation Service Cost <br /> Manual includes rates based on extensive cost data. ) <br />