California State BOE Appraiser Certification Practice Exam

The Cost Approach is the correct choice because it specifically considers the concept of depreciation when determining value. This method calculates the current cost of constructing a similar property and then subtracts the depreciation that the existing property has experienced over time. Depreciation can arise from several factors, such as physical wear and tear, functional obsolescence, and economic obsolescence.

By incorporating depreciation directly into its valuation process, the Cost Approach provides a more accurate reflection of the property's value in its current condition. This makes it particularly effective for appraising properties that are not frequently sold in the market or for those that have unique characteristics that may not be fully captured using sales comparison data.

While the Sales Comparison Approach focuses on the sales prices of comparable properties, and the Income Approach determines value based on the income that the property generates, neither method explicitly calculates depreciation in its valuations. Valuation Analysis is a broader term that can include various methodologies but does not directly pertain to how depreciation is factored into an appraisal.