Which step in the cost approach involves estimating site value?

The step in the cost approach that involves estimating site value is centered around determining the value of the site as vacant. This is a crucial part of the cost approach because it establishes a baseline for valuing the property. By assessing the value of the site in its current, undeveloped state, appraisers can better understand what the land alone would be worth without any improvements.

This estimation typically takes into account factors such as location, zoning regulations, and current market trends to arrive at an appropriate figure. Once the value of the vacant site is established, it can then be combined with the costs of any improvements to establish the overall value of the property.

In contrast, estimating total operating expenses relates more to the costs associated with managing and maintaining a property rather than its intrinsic value. Estimating depreciation pertains to assessing how the property’s improvements have lost value over time, while determining the cost basis for improvements involves figuring out the actual expenses incurred for the property's enhancements. Both of these steps are important within the broader cost approach, but they do not directly address the estimation of the land's value.