Posted by: Robert Alexander | November 5, 2012

Replacement Cost Vs Market Value

There appears to be a huge gap between replacement cost and market value on many properties today. Replacement cost has been relatively constant over the last few years, however the market value has plummeted in many areas of the country. The market value of your property is the amount a buyer would pay for the property including the land no matter how much rebuilding would cost.  The replacement cost is the rebuilding cost to repair or replace the entire structure. This amount is different that the market value the purchase price and the amount owed on the property. Add more confusion with the appraisers of properties today. They will give a sales approach, income approach and cost approach. All these numbers will be different and confusing to most. When using the appraiser’s number, pay close attention to the cost approach as this should better reflect the replacement cost of the property.

Sound confusing? Not really… Properties should be insured for the replacement cost or the appraiser’s cost approach with disregard to market value or the income approach.

For more information on this topic please call 1.800.999.1109 or email Robert Alexander. Also visit our web site at: www.ChappellSmith.com.


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