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comparable sales to account for differences in construction, age,
condition, and size, and derived an indicated value of $90,000
for the subject property under the sales comparison approach.
Mr. Fischer also used the cost approach to value the subject
property as of the date of contribution. The cost approach
evaluates what it would cost to build the subject property at
today’s cost. American Institute of Real Estate Appraisers, The
Appraisal of Real Estate 349 (12th ed. 2001). This cost is then
adjusted to account for depreciation.11 Id. at 349.
Under the cost approach, Mr. Fischer used the Marshall-Swift
valuation service to derive a 1998 value of the improvements of
approximately $533,000, and adjusted this value for physical
depreciation, functional obsolescence, and economic obsolescence.
After these adjustments, Mr. Fischer concluded that the value of
the improvements under the cost approach was approximately
$80,000. Mr. Fischer relied on six different sales of vacant
land under the cost approach to arrive at the land value of the
subject property as if it were vacant. Based on these six sales,
Mr. Fischer derived a land value of the subject property of
approximately $32,000. He then combined the land value as if
vacant with the depreciated cost of improvements to derive a
11Appraisers find the cost approach to be most useful when
buildings are relatively new. Id. at 354. Depreciation is a
subjective determination, and an evaluation of property with
older, more depreciated buildings therefore becomes more
subjective as larger amounts are subtracted for depreciation.
Id. at 357. As noted by respondent’s expert in his report,
appraisers find that the cost approach tends to set the upper
limit of value because no property would be worth more than what
it would cost to build another property of equal utility.
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