Why Arlington Replacement and Market Values Don’t Equate
In an Ideal World, Arlington Market Values Would Reconcile Easily
Arlington 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.
Arlington 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
Arlington 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 Arlington home’s value. Ideally, both
methods would produce the same value for the same Arlington 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 Arlington 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 Arlington 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 Arlington 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!
Neighborhoods in Arlington : Alcova Heights,
Arlington Forest, Arlington Heights, Arlington Ridge,
Arlington
View, Ashton Heights, Aurora Hills, Ballston, Barcroft, Bellevue Forest,
Bluemont, Bonair, Boulevard Manor, Brandon Village, Buckingham,
Cherrydale, Claremont, Clarendon Center, Columbia Forest, Columbia
Heights, Country Club Hills, Crescent Hills, Crystal City, Crystal
Gateway, Dominion Hills, Donaldson Run, Douglas Park, East Falls
Church, Fairlington, Forest Glen, Forest Hills. Glencarlyn, Garden City,
Halls Hill, High View Park/Halls Hill, Jackson Court, Lacey Forest,
Lauderdale, Lee Heights, Lyon Park, Madison Manor, Maywood, New Dover,
Nauck (Green Valley (Nauck) neighborhood in Arlington, Virginia (VA),
22204, 22206 subdivision profile - real estate, apartments, condos,
homes, community) (Green Valley A.K.A. The Valley), Old Glebe, Over Lee
Knolls, Penrose, Prospect House, Randolph Square, Rivercrest, Rosslyn,
Shirlington Crest, Station Square, Tara, Waycroft-Woodlawn, Waverly
Hills, Westover, Willet Heights, Williamsburg, Williamsburg Village,
Yorktown
