How is "Replacement Cost Equity" relevant?

[Rose C]

I've been studying investing in RE for several months now and I've occasionally run across an email that is boasting about a individual property's "Replacement Cost Equity", usually a SFR. If I am correct, this value is based on what it would cost to replace the structures if they burned to the ground. How is this relevant to the market value and why is it used in valuing a property?

Thanks in advance for your replies.

[Ned Carey]

I have been doing real estate for 10 years and I never even heard the term. I think it is probably a bogus term made up to make a property appear more valuable. The fact you can buy a property for less that it cost to rebuild doesn't change it's current value. If you can buy for $50 and it would cost $100 to rebuild - who cares - no one would build something for $100 that you can buy today for $50

For a SFH the only thing it might do is raise you insurance rate if it is based on cost to rebuild. - Ned