Market value is the estimated price at which your property would be sold on the open market between a willing buyer and a willing seller under all conditions for a fair sale. Replacement cost is the estimated cost to construct, at current prices, a building with equal utility to the building being appraised.
CoreLogic property valuation expert James Siebers notes that market value and replacement costs are two distinctly different approaches to valuing a property, and do not need to be identical. Siebers writes:
Market value represents the agreement between buyer and seller of what property is worth. In real estate, it often includes the value of land, site improvements to the land, buildings, and sometimes personal property and intangible assets. In order to compare market value to replacement cost, adjustments must be made for such factors.
Replacement cost is the cost to construct or replace at a given time, an entire building of equal quality and utility, using prices for labor, materials, overhead, profit and fees in effect at the time of the appraisal.