Texas Property Tax Consultant Practice Exam

Which of the following is NOT a step in the cost approach?

1. Applying valuation principles to an existing structure

2. Estimating the cost to construct or reproduce a structure

3. Reviewing sales of comparable properties

4. Adjusting sales to equal the subject property

The correct answer is: Reviewing sales of comparable properties

The cost approach to property valuation primarily focuses on estimating the value of a property based on the cost to construct or reproduce it, while considering depreciation and the value of the land. This approach involves several key steps, one of which is estimating the cost to construct or reproduce a structure, as it is fundamental to establishing the property's value based on new construction costs. Another critical step involves applying valuation principles to an existing structure, which may include assessing various factors like its condition, age, and any necessary repairs or updates. These calculations help to derive an accurate estimate of the property's total value. The option related to reviewing sales of comparable properties pertains to the sales comparison approach instead of the cost approach. In the sales comparison approach, property values are determined by comparing similar properties that have recently sold in the area. Adjusting sales to equal the subject property is also part of the sales comparison approach, further reinforcing that the correct choice in this context is the one that does not belong to the cost approach steps.