If the replacement cost is unknown, what is the first step to finding the dollar depreciation?

Determining the land value is crucial because it establishes a baseline for understanding the worth of the property excluding the building itself. In depreciation calculations, separating the value of the land from the value of the structure helps in accurately assessing how much the building has depreciated over time. The land typically does not depreciate in the same way that the improvements (like the building) do.

Once the land value is determined, one can better analyze the overall property value and how much the building itself has lost in value due to physical deterioration, economic circumstances, or functional obsolescence. This foundational step allows for a more precise calculation of depreciation or the remaining value of the improvement, as it provides a clear picture of what part of the property's total value may still be retained in the land alone. Therefore, it is logical to start with establishing the land value when replacement costs are unknown.