Does the market value of my home matter for replacement cost value purposes?
Excellent question, and often misunderstood. Market value, inclusive of the land underneath, and surrounding your real property, is a fluid number depending upon the economy, interest rates, along with other variables, including; supply/demand factors, psychology or sentiment, and has nothing to do with the replacement cost value(RCV) of your home. RCV, on the other hand, is the amount of dollars in today’s marketplace, factoring for many variables that were mentioned in this FAQ Home section, “How much does my home cost to rebuild,” has no relationship to “market value.” A tip for savvy buyers in the home market, however, is to buy a home when RCV is HIGHER than market value(including land), or market value(including land) is LOWER than RCV. During historical real estate bust cycles, these types of opportunities do present themselves.
