We are purchasing our second home while we maintain the first one as a rental property. The home we are purchasing is $165,000 and was built in 1974. A simple search of real estate listings in our city shows that a new home in a nicer neighborhood (much larger, actually) can be purchased for 229,000 or less.
So far, all the home insurance companies are giving me quotes with a replacement value for my home ranging from 229k-249k. How is it possible that replacement costs for my older home could higher than purchasing a brand new home with more square footage in a better neighborhood? Is there a method of disputing these findings?
To dispute this I would do the following:
Contact one or two contractors [or even 3] and give them the specs on the house in question in terms of square footage, add-ons, updates etc. Even have them come over and look at the place. The contractors should be able to give you a reasonable figure telling you how much it would cost to rebuild your home as it stands now regardless of what new homes in other locations are fetching these days.
Just a note regarding "replacement" value. Replacement coverage of your contents is a separate issue from the replacement costs of the home itself. You can have replacement coverage insurance on the home itself but not on the contents if you so choose.