Actual Age/effective Age Vs. Condition

[Fred]

While I understand the idea that saying a guy is 70, but he could pass for 50 is a way of saying he is in better than average condition and can pass an appraisal test with effective age questions – I still find the wide variety of interpretation used in practice just as impractical for quantitative analysis as listing comp site sizes as “small” “medium” and “large.” "Small" and "effective age" both can mean ANYTHING. One guy's E/10 (on 50) is another guy's E/20 (on 100) and both may lead to the same adjustment.

I always wonder what is the appraiser’s assumed level of reinvestment. On commercial property one can use maintenance and reserve allowances to establish a nearly perpetual income stream. However, for houses reinvestment is not explicit. At one level of reinvestment effective age will be greater than actual in most eyes, at another level equal in most eyes and at another level effective age will be consistently lower in most eyes.

So Greg, how on earth could you expect to make sense out of it? One thing seems obvious, though. If you use effective age, how can you avoid adjusting for differences SOMEWHERE? I subject is E/10 and comp is E/100, there must be some difference somewhere.

Terry

Effective age can be as easily determined as condition. Both are more subjective that they are objective.

This is where it gets confusing. I think effective age IS conditions, as in the guy is 70 but his condition is that of a 50-year old. But when you use that formula that hinges on the cost-value ratio, effective age means something else entirely.

357 yr total life!!! Maybe we had better rethink that.

If you don’t get in the habit, you will have nothing to rethink. And besides, maybe 360-year life is accurage.

Roger,

That whole battle over adjustments and allegedly extracting them from the market when such scant data is available is a proud tradition of appraisers, but is bogus. You are right to know it is generally indefensible since it is typically presented as if it were extracted from the market using a process that is repeatable and statistically significant

I am putting that one in my ‘plagiarize-early-and-often’ file.

 

[Tim Hicks (Texas)]

Effective age for the comparable sales can be awful subjective if you have not personally inspected the property. I rarely use effective age adjustments. I will make condition adjustment and try to have similar actual age comparable sales.

 

[JSmith43]

No that's ok Roger. My "bias" only lasted a couple of minutes.

I think that statement about covers it. My offer expired after 15 minutes anyway :rofl:

Tom: Out of curiosity, I blew the dust off some of my old books. Effective age & Age/Life method of estimating accrued depreciation is covered in AIREA's The Appraisal of Real Estate, 8th Edition, 1983. This book has a collage of sources and contributers. You could almost describe it as a project, the parts were researched and written by many individuals including dozens of MAIs and a few PHD's, appointed by committee (?) and glued together by a professional educator/writer. Whew!

So, I dug a little deeper. Appraising the Single Family Residence, AIREA, Bloom & Harrison, MAI, MAI, 1978. They similarly defined Effective age and age/life depreciation calculation.

Time to dig as deep as I can. It was limited to my lifetime, since I don't collect books from the Jurassic era, like some notable posters



I came up with The Valuation of Residential Real Estate 2nd Edition by Arthur A. May, 1953.
He writes like an old SREA guy. The author doesn't tout any particular designation. AIREA & SREA codes of ethics, etc are among the exhibits in the Appendix.

This guy puts Effective age and Age/Life in a reasonable context by pretending to ask the appraiser who had used the age/life method to defend his decision in court. The example dialog is useful. A snippet regarding the theoretical method Age/Life: "This is a device for window-dressing the appraisal report. If it were a logical method, the percent-um taken could be justified by something other than the appraiser's mere unsupported declaration, "This is my opinion, based on my observation and my experience.""

Well, appraisers. This guy doesn't even try and throw us any bones

 

[JSmith43]

I rarely use effective adjustments.

Good point, when so many ineffective ones are available :rainfro:


So you say you didn't mean it that way? Sorry, I'm practicing for when I plan to go into politics

 

[Tim Hicks (Texas)]

Originally posted by rogerwatland@Jul 17 2005, 04:32 PM

Good point, when so many ineffective ones are available :rainfro:


So you say you didn't mean it that way? Sorry, I'm practicing for when I plan to go into politics

Thanks,

I have corrected my sentence and deserve the criticism for not proof reading.

 

[Tina]

Good point, when so many ineffective ones are available :rainfro:

And Roger scores a TD.....the crowd roars! :rainfro: :rainfro: :rainfro:

(Sorry...I couldn't help it :redface: )

TB

 

[Thomas Fiehler]

The Duck is right. How can someone arrive at an effective age without inspection each of the comparables? Glad to see that badboy dropped from the new forms! h34r:

 

[Terrel L. Shields]

Terrell... I don't have a problem with estimating the effective age of a house which I have inspected up close, but how can an appraiser come up with specific number of years for effective age for the comparables?

Precision is not the same as accuracy. I generally report a single number as 5-10, 10-15, use single numbers for new houses 1,2,3,4,5 in addition to zero. After that, the adjustments are roughly 5% per unit as the most precision that I can support.

If I am in an area where I "know my stuff", which includes the towns closest to me, I probably knew the builder by name. Filapone was unreliable. His houses are poorly built. Titus Chin has been dead 20+ years, retired 50. Solid built homes from the 50's-60's. Geo. Guthrie built FHA homes in the 60's Minimum standards. Barr and Oliver - good houses but low roof pitch. You wanted Darrel Curran. If Sequoyah Fox framed your house, it will be square. If Rick --- built it, it will not be. Quality in the structure is often reflected in the sales price. And, if I can predict this house was built by Guthrie, it is still 1100 SF, 1 carport, and the exterior is in good shape, then if it sells for less than $55,000, it probably has a condition problem. If Rick built it, it probably is just because Rick built it.

You should be able to pick out the anomolous sales in a group of sales. Then you can research it further. It is also a simple fact that since FHA requires a house to be in good condition and owner fin or conv might be in lesser condition, the FHA sales will be higher typically (in addition to maybe rolling the closing costs in)

Rog quotes

A snippet regarding the theoretical method Age/Life: "This is a device for window-dressing the appraisal report. If it were a logical method, the percent-um taken could be justified by something other than the appraiser's mere unsupported declaration, "This is my opinion, based on my observation and my experience.""

I like that.

One book I think is plain and straightforward is Betts and Ely's "Basic Real Estate Appriasal" 1990 - California appraisal textbook, if I am not mistaken.

 

[Tim Hicks (Texas)]

Originally posted by Tina Brumwell@Jul 17 2005, 05:10 PM

And Roger scores a TD.....the crowd roars! :rainfro: :rainfro: :rainfro:

(Sorry...I couldn't help it :redface: )

TB

Tina with a football reference? ZZZZZZZZZZZZZZZZ :asleep:

I would expect you to say "Roger takes the checkered flag!"

 

[Dan Leggett]

OK ... let's change the wording: "Condition for the comparable sales can be awful subjective if you have not personally inspected the property."

In my area "Good Condition" comments mean the homeowner put up some wallpaper border in the kitchen and replaced the internals of one of the toliets.

I know the nail is real, real short but having a numerical starting point (Age/Effective Age) at least gives me somewhere to hang my hat. Personally, I would much rather be in front of my peers or in a courtroom with this type of data than trying to explain "Average, Above Average, Below Good, Better Than Good".

This old goat is always looking for thicker armor for my conclusions. But while trying to teach me, think of a 'Ray Miller' type market day in and day out, not tract housing that most textbooks are based on.