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The Divorce Encyclopedia
Cost Approach

Term Definition Cost Approach - a set of procedures in which an appraiser derives a value by estimating the current cost to reproduce or replace an existing structure, deducting for all accrued depreciation in the property and adding the estimated land value.
Application in Divorce The use of a cost approach to appraising the value of a property may produce a dollar value different from a market or fair market value. This is probably not the most common approach used in valuing the marital home for divorce purposes. This approach is most commonly used when valuing a business and its real assets.

Both divorcing parties may hire his or her own appraisers to value certain assets. Each appraiser may use a different method in order to achieve a more favorable value for the client. As long as it can be substantiated, it is considered a fair practice. In negotiations or trial, determining what method of valuation used was correct or fair is often the topic of discussion.

See also Replacement Cost; Replacement Value; Reproduction Cost

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