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Re: .0
Property insurance value = the cost of rebuilding the house if it
burns down. Mortgage appraisal value = the amount of money that
someone will give you to buy your house. The two figures do not have
to be the same. As examples:
1) Building house X on lot A costs roughly the same (presuming the
lots are fundamentally the same) as building it on lot B in the same area,
but the two houses could have dramatically different market values
depending upon their locations.
2) House A and house B could both have the same market value, but
differ dramatically in the cost of building if A is a small house on a
huge lot (where you are paying for the expanse of land) and B is a
larger house but on a significantly smaller lot.
So to answer your question about how I estimate the value of my home
for property insurance coverage? I don't mess around in this kind of
area -- I'll let the insurance agency do the rebuilding estimates and
tell me how much the insurance will cost. I'll shop around for the
best insurance rate, but I don't want to risk my house burning down and
the insurance company coming back to say "but you told us to insure it
for only this amount!"
-craig
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| To provide more clarity in .0:
The mortgage appraiser actually did two appraisals, one by market value and
the other by reconstruction cost. It is the latter that I FAXed to my
insurance company that lead to their own reappraisal and a subsequent
reduction of my home insurance premium.
Comparing the market value to the reconstruction cost, in my town at least,
the value of the lot exceeds the value of the structure on that lot.
Of course, any reconstruction appraisal yields an unrealistically high number.
That is because it assumes the entire structure will be rebuilt, including the
foundation. Since concrete is rather sturdy, only something like a gas
explosion would reduce everything to rubble.
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