76 sats \ 3 replies \ @Bell_curve 22 Mar \ parent \ on: When Money Dies In The 21st Century econ
I remembered a funny story from last year.
The new insurance company appraised the property. Their appraisal was higher than the estimate my mom gave.
Yes, because they are doing a replacement cost valuation. Market value is a whole different animal-the price a real live buyer will take it off your hands for.
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Is market price usually lower than replacement cost?
I guess it depends on the market
Your tone suggests yes
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For commercia real estate, market price is set by cap rate, which is really the percent return you can get for a given market based on the rents you are receiving. It usually ranges from 4-10 percent per year return, assuming you have no mortgage. Replacement cost, obviously, is the construction cost to build the building as it stands today. So, it varies depending on the market.
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