Two different numbers, and people ask for the wrong one
This page exists mostly to stop somebody paying me for a document their claim cannot use.
Market value is what a buyer would have paid for the property. Replacement cost is what it would take to rebuild the structure. They are different numbers, arrived at by different methods, by different professionals — and on a well-maintained older house in an established neighbourhood they can be a long way apart in either direction.
An appraiser produces the first. A contractor or a public adjuster produces the second.
Your policy names which one governs your claim. Read that provision, or have your adjuster read it, before hiring anybody. It takes five minutes and it decides who you should be calling.
The date belongs to the policy
Almost always the day immediately before the loss — and the policy, rather than the claimant, defines it.
That makes this a retrospective assignment with all the discipline that carries: sales that closed around that date, market conditions as they actually stood then, and nothing drawn from what has happened since. What the neighbourhood did afterwards is not evidence about what a buyer would have paid the day before the fire.
When the building is gone
Which it often is, and it does not stop the work.
Pre-loss condition comes from whatever documents it: photographs, a prior appraisal, the listing history, an inspection report, permits, your own account. The report then states openly that it assumes the property stood in that condition on the effective date — as an extraordinary assumption, named as one rather than buried.
A report that reads as though I had walked through a house that no longer exists is worth less than one that admits what it could not see. The second kind survives being questioned. The first kind collapses the moment somebody asks the obvious.
Where these come from around here
Flood, mostly. The Passaic and the Saddle River through Paterson, Wayne, Little Falls and Lodi, and the waterfront exposure across Hudson County.
Worth knowing that flood coverage generally sits in a separate policy with its own valuation rules, so the answer to “which number governs” can be different for the flood claim and the homeowner’s claim on the same event.
Fire and storm losses make up most of the rest, and New Jersey’s standard fire policy sets a statutory minimum form that policy terms are read against.
The rebuild problem nobody expects
Where a damaged building was legally non-conforming under current zoning — which describes a great deal of the older stock in Paterson, Passaic and the Oranges — what may lawfully be rebuilt can be less than what was there.
A three-family that could not be reproduced as a three-family today is worth less than one that could, and ordinary coverage does not always address the gap. It is a valuation fact, it is a real exposure, and it is worth raising with the carrier before a loss rather than discovering after one.
When the insurer’s figure is well below yours
Put the two side by side rather than trading totals.
Two credible valuations diverge for findable reasons: different effective dates, different comparable selection, or two or three adjustments sized differently. Each of those is arguable on its merits, which is much stronger ground than disagreeing about a bottom line.
And check the obvious thing first — that both documents are answering the same question. A surprising share of these disputes turn out to be a market value sitting next to a replacement cost, with the policy quietly deciding which one was ever relevant.
New Jersey specifics
- New Jersey's standard fire policy sets a statutory minimum form of coverage, and policy terms are read against it. What your policy says about valuation is the starting point for which number the claim actually turns on.
- Flood losses along the Passaic and Saddle Rivers and through the Hudson waterfront are the recurring casualty work in this service area, and flood coverage sits in a separate policy with its own valuation rules.
- Where a damaged building was legally non-conforming under current zoning, what may lawfully be rebuilt can be less than what was there — a real issue in the older stock and one that ordinary coverage does not always address.
What you receive
- A report dated to the effective date the policy or the claim requires
- A market value conclusion built from sales around that date
- Every extraordinary assumption about pre-loss condition, stated plainly
- A clear statement of what the report is and is not — market value, not cost to cure
- Signed USPAP certification
What I need from you
- The policy, or at least the valuation provision from it
- The date of loss
- Whatever documents pre-loss condition — photographs, a prior appraisal, a listing history, an inspection report
- Any valuation the insurer has already produced