How does "market value" differ from "replacement cost"?

The distinction between "market value" and "replacement cost" is essentially about evaluating property in two different ways. Market value represents the price that a property would likely sell for in the current market, reflecting the current economic conditions, demand, and the property's condition. This value can fluctuate based on various factors, such as location and market trends.

On the other hand, replacement cost is focused on how much it would cost to rebuild or replace the property using similar materials and craftsmanship, without taking into account any depreciation or the current market conditions. It provides an estimate based on construction costs at today’s rates rather than what the property might sell for.

Therefore, defining market value as the current selling price and replacement cost as the rebuilding cost captures the essential differences in how these two values are calculated and their purposes.