How to determine effective age?

[Fred]

I have the 12th (and most recent )Edition and its definition of effective age is the same as the one defined in the 2nd edition above.

I wasn't questioning the definition, but whether that text has "methods" (in "details") for deriving effective age.

 

[JT1974]

I'll bypass the issue of whether any appraisal can produce anything more than opinion and say I checked the 9th and 10th editions of that book and going from the index to the page or pages enumerated, find no "method."

Steven, my friend! Now I know what to get you for Christmas!

Weren't those editions published back in the 30's?

 

[Fred]

Steven, my friend! Now I know what to get you for Christmas!

Weren't those editions published back in the 30's?

I'll take the knowledge provided by a couple-of-days silence on textbook methods for effective age as an early present. That way you won't have to spend any of your hard-earned money buying me something I probably already have.

 

[Richard Carlsen]

Whatever you use to determine Effective Age, just make sure that you are consistent appraisal to appraisal. Deviation could be grounds for charges of special treatment, etc.

Be consistent.​

 

[ZZGAMAZZ]

It is the trend of Forum posters to appraise in a straightforward manner rather than to comply with client needs that deviate from textbook protocol. Any comments concerning the need for "remaining economic life" to be more than 30 years regardless of the current condition as reflected in the effective age?

 

[Richard Carlsen]

Any comments concerning the need for "remaining economic life" to be more than 30 years regardless of the current condition as reflected in the effective age?

Lenders typically have problems when the Remaining Economic life is less than the life term of the mortgage. i.e. Effective age is 35 based on Age/Life Method using 60 years economic life resulting in a Remaining Economic Life of 25 minus the 30 year term of the mortgage/note results in the property disappearing 5 years before the loan is paid off. UW's don't like things like that.

I've had this happen on occasion when the property was in less than desirable condition. One UW ask me to change the Effective Age to correct it or change my 60 years economic life to 100 to fix the problem. I said the only thing that I could do was to make the report subject to remodeling/upgrading to the point where the Effective Age was lowered to the point where the Remaining Economic Life was more than the term of the loan. Didn't fly as I remember it.

However, this sort of lead to my now using the Effective Age to make my condition adjustments. The Effective Age as far as I am concerned is reflective of the condition of the property and the cost to cure to bring them to equal condition normally works out to the cost new divided by 60 (economic life). Therefore, a subject house costing $120,000 for the main improvements (house only) would require a $2,000 per year adjustment in any difference in the Effective Age between it and sales in the grid. Works fairly well and seems to be very reflective of the actual market.

 

[Michigan CG]

In training my appraisers, this chart in the Marshall & Swift manual has benefited us greatly. Obviously, it is still an opinion and the life cycle chart only gives approximate ranges, it is still useful.

In reviewing, I have never agreed with people who call the EA "0" People really don't do that....do they?? after some remodeling. In my opinion, it is never brand new again. I have a hard time even believing "5" years on 20-30 year old homes that have been updated. To get to "5" again for a 20+ year old home would require a complete gutting with new wiring,plumbing,fixtures,walls,floors,etc. Absolutely.

hope the chart helps

Mr. Cooper, could you e-mail me that chart. Looks interesting, but I can't read it. Thank you in advance.

 

[Ross (CO)]

How does one USE an Effective Age determination......to MAKE a Condition adjustment ? I thought that primary elements of DIFFERENCE between one property's condition status and that of the other (compared property) would guide the adjustment amount.

Where does cost-to-cure mandate....DRIVE the condition adjustment process ? Who says we really have to CURE anything ? The client might be satisfied with as-is, anyway, and they have no intentions of demanding that the subject owner make corrections. I never realized that a simple and personal judgement about a structure's portrayal of its age.....could render so much protracted calculations and mental chewing gum !

Gina.........are you still out there ? Have you solved your issue regarding effective age for your duplex ? Are you using a URAR or a 1025 ?

Any bets ?......Gina does not return to this posting thread.

 

[ZZGAMAZZ]

ROSS: Maybe a dumb question on my part, but isn't the "cost to cure" a hypothetical scenario? I was taught to address deferred maintenance in the Condition section, incorporate those issues into the physical depreciation section of the CA, and if market reaction warrants it, include a specific "cost to cure" line item in the SC, in addition to the possible impact on the "Condition" line item, typically resulting in downwards adjustments to comparables that do not appear to experience similar curable physical depreciation. Does my question make sense? Does my approach make sense?

 

[David Beasley]

You cannot accurately determine the effective age without doing the cost approach. Since the cost approach would not be applicable in this assignment, simply put N/A in the box. Just because there is a space, does not mean it must be filled in!

Depends on the secondary requirements. For example, the VA wants no cost approach, and not even a lot value in the cost approach section, but they do want an estimated remaining economic life - which by default means also supplying an effective age.