The cost approach is based on the principle of substitution, which states that the maximum value of property tends to be set by the cost of acquiring and equally desirable and valuable substitute property, assuming that no costly delay is encountered in making the substitution. It is most appropriate in the valuation of properties for which no comparable stractures readily exist, such as schools, courthouses, churches and cemeteries. The cost approch consists of five steps:

1. Estimate the value of the land as if it were vacant and available to be put to its highest and best use.
2. Estimate the current cost of constructing the building(s) and site improvements.
3. Estimate the amount of accrued depriciation resulting from physical deterioration, functional obsolescence, and or extra obsolescence.
4. Deduct accrued depreciation from the estimated constuction cost of new building(s) and site improvements.
5. Add the estimated land value to the depreciated cost of the building(s) and site improvements to arrive at the total property value.