We had 4 different insurance companies comes out to appraise the value of our home. Now, we are at the stage where the lender has hired someone to

Asked by Bb, Kansas City, KS Tue Apr 27, 2010

appraise our house. I am very puzzled as to why the insurance says the replacement value for our house is $230,000 but the lender's appraiser is saying it is only worth $100,000. Am I missing something??

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4
Scott Schroe…, , Escondido, CA
Wed Apr 28, 2010
I used to own an insurance agency in another life, so let me weigh in on this. :)

The insurance replacement value is the amount that it should cost to rebuild your home and replace your things in today's market. In most cases, your insurance agent is going to try to keep this on the high side of estimates, so that in the event that there is a catastrophic event, you have enough money to be "made whole."

The realtors and mortgage companies are not looking at the value of your things, or the replacement cost of rebuilding the home. They are only looking at the sales price that homes similar to yours have brought over the last few months.

If you have other questions, please feel free to contact me. You could also contact your insurance agent and ask for a recalculation of the replacement cost. That could lower the cost of your homeowner's insurance in the event you want to make a change (which I don't think I would suggest as a rule).

scott@scott-schroeder.com
0 votes
Harry Newell, , Sterling Acres, Kansas City, MO
Wed Apr 28, 2010
Replacement cost (for insurance purposes) Much like a builder bidding to construct a home, the appraiser calculates the material and labor necessary to construct a duplicate of the structure. All aspects of the construction are taken into consideration. Certain models can be found on the internet that make this process easier. There are also books for appraisers that estimate construction costs and they are updated regularly.

A Real estate appraisal, property valuation or land valuation is the practice of developing an opinion of the value of real property, its Market Value. What are other homes recently sold that are similar in structure, square footage, amenities etc - selling for.

If you are trying to refinance - there is a loan program that may let you refinance without needing an appraisal.
I would be more than happy to determine if you qualify for this program.
0 votes
Real Estate…, Agent, STATEN ISLAND, NY
Tue Apr 27, 2010
Insurance companies determine value based on replacement coast, in other words what it will cost to rebuild the home entirely in the evant the home is completely destroyed. The calculation is based on the size + material and labor. A bank appraisal is based on market value.
Hope this helps. If you'd like more information please feel free to contact me.
0 votes
Linda S. Cef…, Agent, Franklin, WI
Tue Apr 27, 2010
Sounds very suspicious, but without more detailed information, it's hard to tell.
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