Venice Market Values Seldom Equal Their Replacement Values

Venice Market Values Seldom Equal Their Replacement Values

“Ideal” is a Shangri-La kind of a word. It’s not just because of its feel-good, pie-in-the-sky definition (“a standard of perfection or excellence”)—but because contained right there inside the word itself is a tacit admission. It’s only an idea—not something necessarily connected to concrete reality.

Venice residents don’t come across “ideal” anything very often in their daily routines, so few would be surprised to learn that even in something as important as determining the value of their  residence, the calculation turns out to be less than straightforward. The ambiguity owes to the fact that it all depends on how you look at it.

In reality, there are two quite different approaches for determining any Venice home’s value. Ideally, both methods would produce the same value for the same property. That would be the Shangri-La outcome—a fine idea—but it’s seldom the case. The two methods are the Market Value approach and the Replacement Cost approach. Knowing how and why they differ explains why they yield dissimilar results.

When Venice homeowners examine their home insurance policies, they may find a breakdown of the replacement cost. The face amount of such a policy is meant to cover what the current cost would be to construct a similar building of equal quality—one that would have the same utility as the one that was destroyed. Such factors as materials, labor, the builder’s overhead, profit and fees are probably part of that calculation. In actuality, some of the costs that might be encountered may not be included, though: things like demolition of the old structure, debris removal, licenses and permits. It depends on the policy.

The market value is an estimate of the amount a buyer would pay in today’s market to purchase the same home in its current condition. Right off the bat, you can see that this would include the cost of the land—so you might deduce that its market value would automatically be greater than the replacement value. Ideally, that might be true. If the home were brand new. But for structures that have been in existence for a while, that might or might not hold true. For a home in less than top condition, the total might be less… likewise, if the local residential market were in a slump. On the other hand, for older homes having architectural details with fine workmanship that is expensive to duplicate today, the reverse would be true. You get the idea: given the vast number of variables that can influence the difference between market and replacement value calculations, it would be miraculous if the two ever came out the same.

When you are buying, selling—or even insuring—your Venice home, weighing market and replacement values is more than an abstract exercise. I’m here to help with those and many other issues that will help you determine how to make the choices that serve you best. Call me!

Tami Pocevic Headshot
Phone: 941-408-0600
Dated: April 4th 2016
Views: 107
About Tami: Tami has been a licensed real estate agent for over 12 years. She currently resides in Venice and e...

Property Search

RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

Better Call Kim Keller Williams Gold Tami Team - Thank you South West Florida ////
Must Do List Before Moving Into A New House - Ultimate Must Do List Before
Venice Florida Open House - This weekend there will 28 Open
Sarasota County Open Houses - This weekend there will be 166

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

Keller Williams Realty Gold-The VeniceTami Team
3972 Tamiami Trail S.
Venice, FL