There is technically nothing wrong with using a replacement cost estimator (RCE) for property valuation–in fact, it can be a great tool. We all know it provides exactly what its name indicates: an estimate. That being said, RCE’s tend to have a reputation for being inaccurate, which means an agent should avoid using only an RCE in estimation.
Here’s one example of the dangers of using an RCE for a condo: Imagine that a client owns two units in the same condo association. Both feature the exact same floor plan, three floors apart. The top floor unit is what I’d describe as ‘standard’ construction; nothing special inside. The unit a few floors below, however, might as well be a cover shot from Good Homes Magazine. The kitchen alone has to be a $40,000 upgrade. The difference in the need for Coverage A would be staggering here. Just like never judging a book by its cover, you never know what’s behind the condo door. Certainly, using an RCE and properly completing it is far better than winging it.
Remember too that some states provide little regulation about who has to insure what in a condo. In these states, the bylaws of the condo may dictate who has to insure what—meaning each condo in the same city would have different insurance needs.
Bottom line? Let the customer be the decision-maker on Coverage A limits. Use the tools at hand that work, do not wing it, and never guarantee a figure.