Market value and the replacement value are very different.
Market value attempts to establish what a buyer and seller might agree to as a sale price for a particular home in the current real estate market. This includes key factors such as characteristics of the home, recent sale price of similar homes, volume of unsold homes in the area, location (proximity to areas of interest, crime rate, etc.), property size and land value.
Replacement cost estimates the current cost for material, labour, and other activities associated with rebuilding a home with identical features and components, in the event of a total loss. This includes key factors such as characteristics of the home (size, features, age, access, etc.), current and projected material and labour costs, architect and contractor fees (overhead, profit margin, redraft of plans, etc.) and building code upgrades.
Market value is influenced by factors beyond labour and material costs of reconstruction; therefore the market value and replacement cost can differ significantly, particularly during times when there is a decreased demand for houses and home inventory is high.