What method values the property based on its highest and best use and adjusts for depreciation?

The method that values a property based on its highest and best use, while also accounting for depreciation, is the Cost Approach. This valuation method involves estimating the current cost of constructing a building with the same utility as the subject property, subtracting any depreciation due to physical deterioration, economic obsolescence, or functional obsolescence.

In this approach, determining the highest and best use is critical, as it recognizes that a property’s value can vary significantly depending on what it is best suited for, be it residential, commercial, or another purpose. Once the highest and best use is established, the depreciated value of the property can be assessed, providing an accurate valuation that reflects current market dynamics and property condition.

The Cost Approach is particularly useful in situations where there are few comparable sales or rental data available, making it a preferred method for appraising unique properties. Other methods like the Market Approach focus on comparative market analysis and do not specifically consider depreciation in the context of highest and best use, while methods like the Assembly Method and Area Method pertain to different aspects of property analysis and valuation.