Effective Age for historic homes with additions

[Basically Rectangular]

For all y'all cost approach masters.

The subject is built in 1890, was transported a couple of miles to a new location circa 1930, had an addition of approx 75% of the original building area added in 2012, including updates & finishes to the original areas. Current condition is good (I'm saying C3).

I'm pondering my effective age development strategy.

 

[Mr Rex]

I know this is Heresy to some, the notorious "backed in Cost Approach" but appropriate in this case IMHO. Start with the Sales Comparison approach, subtract the site and site improvements values, and consider the effective ages of the comparables similarly. You might also want to review the Life Cycle Chart from M&S or similar. It shows +/-140 year old houses with +/-10 years effective age. Its hard to contemplate a 100+ year old house with +/-10 years effective age until you analyze the market data. We have some pre-Civil War homes that escaped Sherman's torch. It is an interesting case study to appraise them.

 

[NachoPerito]

You can blend it based on weighted square footage

 

[George Hatch]

I think the question of remaining economic life is the thing, and that effective (economic) age is the residual of the accrued depreciation equation, not a principal factor in it.


This is the equation that goes with the M&S Depreciation tables:

Economic Life
- Remainder
Effective Age

This is the equation that readily enables you to conclude that a beater may contribute to a very different level of loss in one location than in another. Or how a structure in very average condition may have already exceeded it's economic lifespan.

 

[glenn walker]

For all y'all cost approach masters.

The subject is built in 1890, was transported a couple of miles to a new location circa 1930, had an addition of approx 75% of the original building area added in 2012, including updates & finishes to the original areas. Current condition is good (I'm saying C3).

I'm pondering my effective age development strategy.

35 to 40 Years Just a WAG

 

[Terrel L. Shields]

I'm pondering my effective age development strategy.

"backed in Cost Approach" but appropriate in this case IMHO. Start with the Sales Comparison approach, subtract the site and site improvements values, and consider the effective ages of the comparables similarly

that is market derived effective age which is based upon accrued depreciation, which is all that USPAP requires. You are not required to segregate the various forms of obsolescence. So the key is finding an old updated house (comp) that is similar in condition.

Method below...

 

[CANative]

Effective Age is an opinion and one of the considerations is how the property is maintained relative to those of it's class in it's competitive market area.

If the 75% new is a modernization of the main components including kitchen and baths, HVAC, etc. and 25% is now a small historical section of the residence, the the EA is going to be lower and the REL will be longer.

 

[Terrel L. Shields]

Effective Age is an opinion

If you use comps from the same market area, reverse engineer the cost (using REPLACEMENT COST) then EA is a calculation. If similar homes 100 years old calculate to 20 years EA, then your subject can safely be demonstrated to support an estimate of 20 years EA. And total life is the inverse of the annualized loss in value.

 

[CANative]

Value is an opinion. Adjustments are opinions. Market rent is an opinion. GRM and Cap rates are opinions. EA is an opinion. Opinions that require calculations to form.