Ohio Real Estate Practice Exam 2025 - Free Real Estate License Practice Questions and Study Guide

The Cost Approach is particularly suited for analyzing newly constructed properties because it focuses on the cost to replace or reproduce the property rather than relying on market data or income generation. Since a newly constructed property often has few comparable sales data—especially soon after completion—the Cost Approach provides a clear framework.

This method calculates the current cost of constructing the property, including materials and labor, then adjusts for depreciation and land value. By assessing what it would cost to build the property today, appraisers can effectively establish a value based on its intrinsic construction costs.

In contrast, while the Sales Comparison Approach relies on the sale prices of similar properties to assign value, it may not capture the nuances of a new property that has no direct comparables. The Income Approach is more applicable to investment properties that generate rental income, focusing on the revenue potential rather than the building's cost. Cash Flow Analysis typically pertains to investments in real estate rather than the valuation of the property itself, making it less relevant in this context. Thus, the Cost Approach is the most logical choice for evaluating a newly constructed property.