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Economic Life
- Thread starter Jeff Horton
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Mztk1
Senior Member
- Joined
- Dec 3, 2006
- Professional Status
- Certified Residential Appraiser
- State
- Florida
Incognito is right about the REL being "0" on a property in good condition if residential doesn't add to the value due to HBU. But in practice I use total economic life and remaining economic life to measure physical depreciation only, and then make separate adjustments for functional and economic. I know it can be done either way and that by the book the total economic life of a structure would include the functional and economic depreciation.
When I do my total economic life, because of situations like you are in, I want something physical I can fall back on. I can either extract a total economic life from the market or I can use the table on page E-7 in the Marshall & Swift which says this:
Low Quality: Frame 45 yrs, Masonry 50 yrs; MFH SW 20 yrs, Multi-Wide 30 yrs
Fair Quality: Frame 50 yrs; Masonry 55 yrs; MFH SW 25 yrs, Multi-Wide 35 yrs
Avg Quality: Frame 55 yrs, Masonry 60 yrs; MFH SW 30 yrs, Mutli-Wide 40 yrs
Good Qualy: Frame 55 yrs; Masonry 60 yrs; MFH SW 35 yrs, Multi-Wide 45 yrs
VGd Quality: Frame 60 yrs; Masonry 60 yrs; MFH SW 40 yrs, Multi-Wide 50 yrs
Exc Quality: Frame 60 yrs; Masonry 65 yrs; MFH SW 45 yrs, Multi-Wide 55 yrs
Sometimes I find it possible to extract the total economic life from the market, but that's a long process using houses that were not updated (usually less than 5 years old), knowing the land value, and measuring their cost against their sale price, determining the depreciation, dividing into the cost to build and finding the number of years it would take to fully depreciate.
When I do my total economic life, because of situations like you are in, I want something physical I can fall back on. I can either extract a total economic life from the market or I can use the table on page E-7 in the Marshall & Swift which says this:
Low Quality: Frame 45 yrs, Masonry 50 yrs; MFH SW 20 yrs, Multi-Wide 30 yrs
Fair Quality: Frame 50 yrs; Masonry 55 yrs; MFH SW 25 yrs, Multi-Wide 35 yrs
Avg Quality: Frame 55 yrs, Masonry 60 yrs; MFH SW 30 yrs, Mutli-Wide 40 yrs
Good Qualy: Frame 55 yrs; Masonry 60 yrs; MFH SW 35 yrs, Multi-Wide 45 yrs
VGd Quality: Frame 60 yrs; Masonry 60 yrs; MFH SW 40 yrs, Multi-Wide 50 yrs
Exc Quality: Frame 60 yrs; Masonry 65 yrs; MFH SW 45 yrs, Multi-Wide 55 yrs
Sometimes I find it possible to extract the total economic life from the market, but that's a long process using houses that were not updated (usually less than 5 years old), knowing the land value, and measuring their cost against their sale price, determining the depreciation, dividing into the cost to build and finding the number of years it would take to fully depreciate.
Mztk1
Senior Member
- Joined
- Dec 3, 2006
- Professional Status
- Certified Residential Appraiser
- State
- Florida
Total economic life and age are two different things.
Michigan CG
Elite Member
- Joined
- Nov 1, 2006
- Professional Status
- Certified General Appraiser
- State
- Michigan
You guys aren't actually suggesting pulling data from the Market are you?
EVAUSA
Junior Member
- Joined
- Jan 26, 2008
- Professional Status
- Certified Residential Appraiser
- State
- California
It depends on the structure. A log cabin's total life is well over 100 years. I've appraised enough 1950's and 60's houses in ORIGINAL condition (walls,plumbing, electrical, cabinets, fixtures, etc) and they are still livable, probably can squeeze a few more years out before pipes burst or electrical panel blows. But since the typical buyer is thinking "complete overhaul", the improvements contributory value is significantly diminished compared to a newer or updated home, I draw my line at about 60 years.
Mr Rex
Elite Member
- Joined
- Jan 12, 2004
- Professional Status
- Certified Residential Appraiser
- State
- North Carolina
No shirt Sherlock.
Mztk1
Senior Member
- Joined
- Dec 3, 2006
- Professional Status
- Certified Residential Appraiser
- State
- Florida
You just never know, Rex. It is surprising where some of us disagree. I think we all remember Dave making adjustments to his comps for the subject's concessions. I know you know your stuff, but I also think I know a little and I've said some dumb stuff unintentionally before.
Mr Rex
Elite Member
- Joined
- Jan 12, 2004
- Professional Status
- Certified Residential Appraiser
- State
- North Carolina
Heres something I keep in my favorites:
http://cbeweb-1.fullerton.edu/finance/journal/papers/pdf/past/vol05n01/v05p041.pdf
http://cbeweb-1.fullerton.edu/finance/journal/papers/pdf/past/vol05n01/v05p041.pdf
EVAUSA
Junior Member
- Joined
- Jan 26, 2008
- Professional Status
- Certified Residential Appraiser
- State
- California
Make it really easy and use 100!
It depends on the structure. A log cabin's total life is well over 100 years. I've appraised enough 1950's and 60's houses in ORIGINAL condition (walls,plumbing, electrical, cabinets, fixtures, etc) and they are still livable, probably can squeeze a few more years out before pipes burst or electrical panel blows. But since the typical buyer is thinking "complete overhaul" in a home of this age, the improvements contributory value is significantly diminished compared to a newer or updated home, so I draw my line at about 60 years.
BTW, I dont include the cost approach, I let them condition for it. If they want it on an older SFR where I have a reliable sales comps, I give it absolutely no weight and disclose the heck out of it so anyone reading it wont rely on it either. Unless of course they want to fork over the bucks for me to take the time necessary work it out and put my smiley face stamp of approval on it.
...you can call me lazy, I dont mind. I make up for it where it counts.
You probably don't want to know what I am suggesting.
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