Chat
Chat with Sales Hours: Monday-Friday 8:30 a.m. - 4:30 p.m. (CST)
Contact Sales
Call Sales Toll-Free 1-(866) 774-3282 Hours: Monday-Friday 7 a.m. - 5 p.m. (CST)
Product Login
Product Log-in
Product Support
Product Support
Email Sales
Contact Sales
After Hours
  • Support
  • Sign In Sign In
  • AUS NZ UK
CoreLogic - Home
  • Solutions
    view solutions by:

    Data Solutions

    • Lead Generation
    • Property Data
    • Location Intelligence

    Real Estate

    • Multiple Listing Enterprise
    • Agent & Broker

    Mortgage

    • Origination
    • Servicing
    • Appraisal
    • Commercial Property Tax

    Insurance

    • Hazard Risk
    • Catastrophe Risk Management
    • Risk Evaluation
    • Underwriting Automation
    • Weather
    • Claims Automation
    • Restoration
    • INTRCONNECT

    Mortgage Lenders

    • Origination

    Mortgage Servicers

    • Residential Property Tax
    • Default & Loss Mitigation
    • Portfolio Insight & Monitoring

    Mortgage Appraisers

    • Appraisal

    Real Estate Agents & Brokers

    • Agents & Brokers

    Real Estate MLS

    • Multiple Listing Enterprises

    Commercial Real Estate Owners

    • Commercial Property Tax

    Marketing Departments

    • Property Data

    Insurance Underwriters

    • Risk Evaluation
    • Underwriting Automation
    • Hazard Risk
    • Catastrophe Risk Management

    Insurance Risk Managers

    • Risk Evaluation
    • Hazard Risk
    • Catastrophe Risk Management

    Insurance Claims

    • Claims Automation
    • Restoration Contractors
    • Weather Verification

    Construction Contractors

    • Restoration Contractors

    General

    • Location Intelligence
    • Lead Generation
    • Data Solutions
  • Resources

    Reports

    • Climate Change
    • Construction Cost Update
    • Construction Insights
    • Home Price Insights
    • Homeowner Equity Insights
    • Loan Performance Insight
    • Mortgage Fraud
    • Property Tax Delinquency
    • Single-Family Rent Index

    Insight Blogs

    • Hazard HQ
    • Office of Chief Economist
    • Affordable Housing
    • Homebuying
    • Insurance
    • Other Articles

    More Resources

    • Events
    • Case Studies
    • White Papers
    • Podcasts
    • Quick Takes
  • Company
    • About
    • Leadership
    • Newsroom
    • Contact
    • Careers
  • Search
CoreLogic - Home
  • Solutions
  • Resources
  • Company

    • About
    • Leadership
    • Newsroom
    • Contact
    • Careers
  • Accounts

    • Products Sign-in
  • Contact

    • Sales Contact
    • Product Support
  • Regions

    • Australia
    • New Zealand
    • United Kingdom
  • Social

    • Facebook
    • Instagram
    • Linkedin
    • Twitter
    • Youtube
Solutions
VIEW BY:
  • Data Solutions

    • Lead Generation
    • Property Data
    • Location Intelligence
  • Real Estate

    • Multiple Listing Enterprise
    • Agent & Broker
  • Mortgage

    • Origination
    • Servicing
    • Appraisal
    • Commercial Property Tax
  • Insurance

    • Hazard Risk
    • Catastrophe Risk Management
    • Risk Evaluation
    • Underwriting Automation
    • Weather
    • Claims Automation
    • Restoration
    • INTRCONNECT
  • Mortgage Lenders

    • Origination
  • Mortgage Servicers

    • Residential Property Tax
    • Default & Loss Mitigation
    • Portfolio Insight & Monitoring
  • Mortgage Appraisers

    • Appraisal
  • Real Estate Agents & Brokers

    • Agents & Brokers
  • Real Estate MLS

    • Multiple Listing Enterprises
  • Commercial Real Estate Owners

    • Commercial Property Tax
  • Marketing Departments

    • Property Data
  • Insurance Underwriters

    • Risk Evaluation
    • Underwriting Automation
    • Hazard Risk
    • Catastrophe Risk Management
  • Insurance Risk Managers

    • Risk Evaluation
    • Hazard Risk
    • Catastrophe Risk Management
  • Insurance Claims

    • Claims Automation
    • Restoration Contractors
    • Weather Verification
  • Construction Contractors

    • Restoration Contractors
  • General

    • Location Intelligence
    • Lead Generation
    • Data Solutions
Resources
  • Reports

    • Climate Change
    • Construction Cost Update
    • Construction Insights
    • Home Price Insights
    • Homeowner Equity Insights
    • Loan Performance Insight
    • Mortgage Fraud
    • Property Tax Delinquency
    • Single-Family Rent Index
  • Insight Blogs

    • Hazard HQ
    • Office of Chief Economist
    • Affordable Housing
    • Homebuying
    • Insurance
    • Other Articles
  • More Resources

    • Events
    • Case Studies
    • White Papers
    • Podcasts
    • Quick Takes

Home / Intelligence / Blogs / Insurance / Market Value vs. Replacement Cost

ABOUT THE AUTHOR
Buy Team
Buy Team
View Profile
  • March 22, 2016

Market Value vs. Replacement Cost

How to understand the difference between these two value approaches


The market value and replacement cost of a building are not the same thing. They are distinctly different concepts which are estimated using different criteria. It is not necessary that the market value and replacement cost of a building are identical. They are two distinctly different approaches to valuing a property.

Market value is the estimated price at which your property would be sold on the open market between a willing buyer and a willing seller under all conditions for a fair sale. Replacement cost is the estimated cost to construct, at current prices, a building with equal utility to the building being appraised.

When comparing market value to replacement cost, it is important to understand what both represent and what factors are considered in each circumstance. Otherwise, a meaningful comparison cannot be made.

Market value represents the agreement between buyer and seller of what property is worth. In real estate, it often includes the value of land, site improvements to the land, buildings, and sometimes personal property and intangible assets. In order to compare market value to replacement cost, adjustments must be made for such factors.

Replacement cost is the cost to construct or replace at a given time, an entire building of equal quality and utility, using prices for labor, materials, overhead, profit and fees in effect at the time of the appraisal. The construction or replacement of the building uses modern materials and current methods, designs, and layouts. Replacement cost does not take into consideration improvements necessary to conform to change building codes, demolition, debris removal, site accessibility, reuse of building components or services, overtime, bonuses for labor, abnormal soft costs, extraordinary fees, premiums for materials, and other various contingencies.

In addition to material and labor costs, CoreLogic cost data includes: consideration of permits, surveys, builders risk insurance, sales taxes, built-ins and other costs that would typically be paid for by a consumer in a particular market, for example, an electrical or plumbing allowance.

Unless specifically added to your cost estimate, the CoreLogic costs do not include real estate commissions, land, landscaping, sidewalks, driveways, patios, well and septic systems, sewer and water systems, and other land improvements.

Although the concepts of market value and reconstruction cost are different, both are affected by economic conditions. The supply and demand for housing also impact the fair market value. The supply and demand for labor and materials affect replacement cost. When situations arise where supply does not equal demand, market value, as well as replacement cost can change quickly. These conditions can be short term or temporary. At CoreLogic we continually monitor changing market conditions throughout the United States and Canada and make adjustments for these situations where and when appropriate.

It is important to note that the fair market value and replacement cost for a building may not be the same. The reason that they could be different is because they are different concepts. Market value is in the eye of the buyers and sellers, while replacement cost is the sum of all elements brought together to produce a physical property. In the example above, we have made the two total valuations identical, which is the ideal. Overhead and profit component is just one of a number of variables that can change the total a cost approach valuation.

© 2021 CoreLogic, Inc. All rights reserved

  • Category: Blogs, Insurance, Intelligence
  • Tags: Home Value, Market Value, Replacement Cost
ABOUT THE AUTHOR
Buy Team
Buy Team
View Profile

Related Posts

Tornado footprints in Southern California captured by CoreLogic's weather verification technology as viewed in CoreLogic Reactor™.
Blogs

A Rare Los Angeles Tornado and Near Hurricane-Force Winds in San Francisco

CoreLogic Weather Verification Services captured wind and tornado footprints from the severe weather system in California.

March 24, 2023
atmospheric rivers california
Core Conversations

What Was it Really Like to Live Through the California Floods? Our Team Spills

A Conversation With Kent David and Tom Larsen Since the beginning of the year, California has been drenched by atmospheric rivers. The flooding in California

March 22, 2023
Ecuador earthquake
Blogs

M6.8 Earthquake Near the Coast of Ecuador

CoreLogic estimates that insurable losses from the Ecuador earthquake will be up to $600 million.

March 21, 2023

About Corelogic

  • Newsroom
  • Leadership
  • Careers
  • Ethics & Compliance

Accounts

  • Products Sign-in

Contact

  • Sales Contact
  • Product Support

Regions

  • CoreLogic Australia
  • CoreLogic New Zealand
  • CoreLogic UK

Follow & Connect

  • Facebook
  • Instagram
  • Linkedin
  • Twitter
  • YouTube
© 2023 CoreLogic. All rights reserved.
  • Legal
  • Privacy Policy
  • CCPA
  • Cookie Preferences
  • Security
  • Sitemap
  • Accessibility
  • Legal
  • Privacy Policy
  • CCPA
  • Cookie Preferences
  • Security
  • Sitemap
  • Accessibility