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Market Value less than estimated reinstatement - unusual?
scottishgirl87
Posts: 689 Forumite
Considering putting in an offer on a house that according to the Home Report (Scotland) is valued at £25k less than the estimated reinstatement cost for insurance purposes - is this strange? Haven't seen this before on any of the other properties we have viewed and wondered if this would have any adverse effect on anything?
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Comments
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If it's an out of the ordinary, or specialist build property, that might account for this. If it's run of the mill, as you say, you'd normally expect the rebuild to be cheaper than market value.0
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scottishgirl87 wrote: »is valued at £25k less than the estimated reinstatement cost for insurance purposes - is this strange?
Exclude the land value as well in your calculation.0 -
Thrugelmir wrote: »Exclude the land value as well in your calculation.
Ahh ok, so that might be the reason for it? It's a typical run of the mill mid-terrace house.0 -
If it's in an area where there is no demand, for whatever reason, then the market value will be lower in comparison to the re-build cost.0
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being stone built is one of the more common reasons, esp in Scotland0
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People often think market value and reinstatement re related in some way, but they are not. They are completely independent valuations of your house for completely different purposes. There are thousands and thousands of houses in the UK where OMV is lower then reinstatement value.
I remember as a student in Sheffield in the mid 1980s we had to do a property valuation assignment. 2 bed mid terraced houses were selling for around £10k but the reinstatement was over £50k. There are parts of the northwest and northeast where the OMV of properties is very low,but the cost of rebuilding them is massively higher.
Terraced houses always have a much higher rebuilding cost per square metre than semis or detached houses due to the additional costs of shoring up adjacent properties and the limited space in which to work (which makes access by plant and,arch inert difficult).Eat vegetables and fear no creditors, rather than eat duck and hide.0 -
Market Value = value to buy it
Reinstatement Value = cost to knock what's left down, clear it, and build it again.
It has nowt to do with land values or construction type.Stop! Think. Read the small print. Trust nothing and assume that it is your responsibility. That way it rarely goes wrong.
Actively hunting down the person who invented the imaginary tenure, "share freehold"; if you can show me one I will produce my daughter's unicorn0 -
Thrugelmir wrote: »Exclude the land value as well in your calculation.
A Reinstatement Valuation will already exclude the land cost0
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