In which appraisal assignments is the cost approach often employed?

The cost approach is often utilized in scenarios where new buildings, insurance appraisals, and specialty buildings are involved. This approach is particularly effective for properties that do not have a substantial market history or where comparable sales data may be limited.

For new buildings, the cost approach allows appraisers to estimate the current cost to construct a similar property, taking into account factors like materials and labor costs. Insurance appraisals benefit from this method as it helps determine the cost to replace or rebuild structures, ensuring that owners have adequate coverage. Specialty buildings, such as those used for specific industrial purposes or unique commercial uses, often lack comparable sales, making the cost approach a practical and sometimes necessary assessment tool.

In contrast, while existing properties and residential homes may also be appraised using the cost approach, it is not the primary method typically employed for these types. Instead, for many existing properties and residential homes, the sales comparison approach—which evaluates similar properties that have recently sold—tends to be more relevant and preferred. Therefore, the use of the cost approach shines most clearly in the areas outlined in the correct choice.