Which statement is correct about the cost method of appraisal?

The cost method of appraisal is primarily concerned with estimating the value of a property by calculating the cost to reproduce or replace it, minus any depreciation. This approach is particularly useful for properties that are unique or where there are few comparable sold properties to reference.

By setting the upper limit of value, the cost approach acknowledges that the value of a property will not exceed the cost to create or replace it, including the value of the land. This makes it a practical method for appraisers to provide a structured estimate of value, especially when dealing with new constructions or special-use properties.

In contrast, the other statements do not accurately reflect the characteristics of the cost method. The cost method does not rely solely on sales data, as its main focus is on replacement costs rather than comparable sales. While it can help in estimating depreciation, it may not necessarily do so with great ease, especially with economic fluctuations impacting the perceptions of value. Moreover, it does not always reflect current market trends because it is more static in nature, relying heavily on the input cost rather than dynamic market changes or consumer demand.