Comments - If Remaining Economic Life Is Less Than 30 Years

[Terrel L. Shields]

Effective Age is an estimate based on Condition and Quality of the subject.

What @DWiley said

nd, why are you using the Cost Approach on a house with an effective age of 40-years?

why not? It works for any age when you extract depreciation from your comps

 

[chad hampton]

Lender's computers aren't able to process the paperwork on a home if that magic number is less than 30. I learned that pretty fast many years ago.

They want us to be truthful, until it becomes inconvenient for them.

 

[miktay]

Lender's computers aren't able to process the paperwork on a home if that magic number is less than 30. I learned that pretty fast many years ago.

They want us to be truthful, until it becomes inconvenient for them.

What he said.
The computer program will reject your common sense.

 

[DWiley]

Lender's computers aren't able to process the paperwork on a home if that magic number is less than 30..

And given the intended use of a mortgage related appraisal, that makes perfect sense. Who would want to make a 30 year loan on a property with only 20 years of remaining life? It is a legitimate risk concern, and evaluating risk is the very reason for ordering the appraisal in the first place.

Reporting a remaining economic life of less than 30 years is an issue for a lender, and it is a conclusion that is likely to be challenged. So, if one is going to report such, it would be very prudent to have derived that number actually using recognized methods and techniques - and that does not include, "it was just an estimate."

There are many appraisers who do not know (were not trained?) how to actually extract and support the effective age and remaining economic life of a property.

 

[Terrel L. Shields]

Who would want to make a 30 year loan on a property with only 20 years of remaining life?

Yet the bank will make that 30 year loan to a 70 year old man or woman...? Law nevertheless. Just an observation.

 

[chad hampton]

And given the intended use of a mortgage related appraisal, that makes perfect sense. Who would want to make a 30 year loan on a property with only 20 years of remaining life? It is a legitimate risk concern, and evaluating risk is the very reason for ordering the appraisal in the first place.

Reporting a remaining economic life of less than 30 years is an issue for a lender, and it is a conclusion that is likely to be challenged. So, if one is going to report such, it would be very prudent to have derived that number actually using recognized methods and techniques - and that does not include, "it was just an estimate."

There are many appraisers who do not know (were not trained?) how to actually extract and support the effective age and remaining economic life of a property.

That's all true. So they should take the report that estimates a 20 or 25 yr remaining econ life and make their lending decision. When it is questioned, we all know what they are trying to say - put 30 on the line and then everyone gets paid.

If they were really concerned with the real remaining econ life, they would have come back and question some of the 70 yr old POS properties they see every day that has "30" on that line. I've never been asked to reconsider it to a lower remaining econ life.

 

[Terrel L. Shields]

put 30 on the line and then everyone gets paid.

Funny thing is, apparently they think the property value will be zero 30yr down road and loan balances still high. So in 20 years what is the loan balance and what is the land value?

 

[RSW]

What about a property that is zoned residential, is located next to commercial and will most likely be commercial in the next 20 years? What is the REL?

 

[Terrel L. Shields]

What is the REL?

Can't see the future, but can forecast same, so if it seems destined to change, forecast same and cärry on. Send seizure meds prior to the report however. Lender will need 'em.

 

[glenn walker]

The house will be there many more years than 30 because it will be either lived in or someone will update it .. No matter we have homes 100 years old and guess what they get taken car of or they just go into disrepair ** There are very few properties that only have 20 years left ** YOU are just making a guess and nothing more so make it 35 years and be done. YOU ARE NOT THAT GOOD : ) LOL