Saline Real Estate and Homes for Sale

How do Market Value and Replacement Cost relate to the Homeowner's Insurance for your Saline real estate?  Let's examine that today.

The cost of your homeowner's insurance is not necessarily related to the market value of your house; this is a common misconception among those looking for insurance.  Market value, which includes the cost of land, is what the buyer will pay for the property.  Using comparables, market trends, seasonality, and other available data, it is relatively easy to get within a few thousand dollars of a "fair selling price."  From there, market supply and buyer demand determines the final price.  Replacement cost is what the home would cost to build based on current construction costs, special features, size, and age of the home.

Much of the homeowner's insurance sold today is on the basis of limited guaranteed replacement cost.  This means that the insurer will pay whatever it costs to rebuild the house (most insurance companies now cap this at 125%).  Therefore, you can appreciate that the insurance companies want to keep insurance on the house as close as possible to the true replacement cost.  Because the cost of replacement continues to rise, most insurers automatically increase the amount of insurance on your home each year, to keep pace.  Even so, an estimated 70% of the homes in America are under-insured.

Insurance companies calculate the amount of the coverage necessary using a cost estimator.  They will ask for specific information on the home and then use publications or software that uses the residential building costs for your specific area to give a cash value to each feature.  The total is the cost to rebuild the home with materials of like kind and quality, and what the insurance coverage will be based upon.

You may think it would cost less to rebuild the home than the amount for which it is insured, but you must keep in mind that replacement costs are always more expensive than building new construction - about 20-30 percent more expensive.  If a house was completely destroyed by fire, there would be other costs along with labor and materials; you would also need the special services of demolition and debris removal experts, which are covered, not in addition to, but part of the replacement cost limit.

So, there you have it - how Market Value and Replacement Cost relate to the homeowner's insurance for your Saline real estate.  And remember, if you have questions about homeowner's insurance, consider Insurance One.

If you have questions about your specific situation, or if you're considering buying or selling any Saline real estate, you owe it to yourself to take advantage of my experience in the Saline market.  I'd be happy to meet with you!  Just give me a call at (734) 476-2063, or send an e-mail, "Vance (at) SalineMichiganRealEstate (dot) com".

You can search for homes and condos in Saline here.

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