What approach is typically used to appraise land in the cost approach?

The correct approach commonly used to appraise land in the cost approach is the market data approach. This method focuses on assessing land value by comparing it to similar properties that have recently sold in the same or comparable areas. The market data approach is grounded in the principle of substitution, which states that a buyer will not pay more for a property than the cost of acquiring a similar one with equal utility. Therefore, by evaluating the sale prices of comparable pieces of land, appraisers can establish a reasonable estimate for the land being appraised.

Other options, such as the income approach, primarily focus on revenue-generating properties and involve calculating potential income versus costs to determine value. The gross rent multiplier approach is a specific application of the income approach, usually used for income-producing residential properties rather than land. The option approach does not directly pertain to standard appraisal methods for land value. Thus, using the market data approach provides the necessary context and data points to accurately appraise land in the cost approach framework.