Economic Life

[Joyce Potts]

Here's a concept:

Why not let the appraiser provide average economic life AND the remaining physical and/or economic life based on their analysis of the market data and let the lending community based their lending decisions accordingly!

25 year old manufactured home going for an FHA or VA loan and if the appraiser doesn't throw in the LIE that has at least 30-35 years, it's a dead deal?

How did it ever get this bad? Oh, wait--that follow the money thing.

 

[Webbed Feet]

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.

EVA,

Yes, but unfortunately someday when you end up facing a board complaint and if the appraisal as a CA in it, you'll find out the hard way that just saying "I give this POS approach no weight." does not releave you from the requirement of having met USPAP for developing and reporting a credible approach. Because you did it.

Webbed.

 

[Fred]

"I give this POS approach no weight." does not releave you from the requirement of having met USPAP for developing and reporting a credible approach. Because you did it.

Webbed.

Perhaps you can show the "credible approach" requirement. I can find the "credible assignment results" (SOWR) and "credible appraisal" (Std 1) requirements. But the "credible approach" requirement is a bit tough to locate.

 

[JSmith43]

Some neighborhoods just spin out of control and go to hell in a hand basket over a few years time. Others slowly wither away. Some that have become POS for a while sometimes stir to life like a corpse on Halloween and thrive via gentrification activities.

So, anyone out there using a system that defaults to a sample so large as to have a straight line or near straight line progress toward kaput isn't giving out very useful information, IMO. Might as well say so. But, it might be what they want. I would thoroughly describe the limitations of the concept of remaining economic life in SOW commentary.

If it is a default scenario, Just tell them 30+ years, we don't see any economic train wreck a coming and are defaulting to averages for the metro area, something like that:laugh: If something bad is a coming, show them what you've got that makes you lean that way.

 

[Mark to 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
.

The above references case studies of both actual mortality and ages at which major reconstruction had taken place.

For those of you using claiming to use Marshall and Swift for the cost approach I would think that you would want to reference the above as it is important for the depreciation. Try using M&S for all parts of the cost approach and you will find it is more accurate.

It is also a nice table to fall back on in case you ever need it.

 

[Pat Butler]

I don't think there is an agreed upon definition of what normal upgrading consists of. It's assumed that normal upgrading is part of extending a property's economic life. Does that mean that subsequent owners can continue to invest small amounts of money over time, but on a consistent basis?

At what point does a 'major' upgrade signal the end of the economic life of a property?

I had said earlier that there are many old cities in my market with houses over 100 years. Many of those have just had routine maintenance as things broke. The market values in many of these older towns simply aren't high enough to support demolishing the older housing stock and rebuilding new. The new houses would be priced too high for their market. Therefore, the owners of these older houses just keep plodding along by fixing whatever needs fixing and the cumulative economic lifes of many of these properties exceed 100 years. Why does everyone use such low numbers for total economic life?

 

[Joyce Potts]

Who made M&S the all knowing, all saying Bible of reproduction/replacement values and/or economic life. I don't find them all that reliable, to be perfectly honest.

I'd rather trust my local builder providers, builders and Home Depot, to be honest.

But I guess it's cheap, industry accepted and easy, so there you have it. Who needs accuracy?

 

[Michigan CG]

industry accepted and easy

....

And peer accepted, right or wrong.

 

[JSmith43]

....

And peer accepted, right or wrong.

I don't like the peer accepted standard. Peer accepted standards were tried on a grand scale in WW2

 

[Webbed Feet]

Perhaps you can show the "credible approach" requirement. I can find the "credible assignment results" (SOWR) and "credible appraisal" (Std 1) requirements. But the "credible approach" requirement is a bit tough to locate.

Mr. Santora,

Sigh, more word parsing... Ok, in Oregon, include a cost approach in an appraisal report with the land / site value pulled out of your rump, claiming M&S was used for data when it wasn't, and depreciation pulled out of thin air. Along with a disclaimer the approach was given no weight because the client demanded it so that justified the CA hokus pokus you pulled.

Turn yourself into my State board with a copy of your report. Word parsing or not, expect them to explain what lack of credibility in your approach to value means. You may be right, they may use some word(s) other than "credibility," or variant of the word, regarding it to you. However they opt to explain it, make sure you have your checkbook with you.

Webbed.