Effective age

[Greenback]

I have a question. It's an effective age question. I know I how I do it, but I'm not interested in discussing how I do it. Here is the question..

In residential Appraising, applying paired sale analysis and comparing in general, do you seasoned Appraisers let the cost Approach dictate the effective age of all comparables when extracting the effective age itself and the dollar or percentage adjustments in the sales comparison approach while using the appropriate techniques or methods used in the sales comparison approach? AND, would the effective age of each comparable stay the same no matter what when a different subject property is used with the same comparable properties?

For the record, I use effective ages when paired, not actual age (99% of the time).

Ok, I'm ready for the opinions and facts...Shoot!

 

[Michigan CG]

Thread moved to more appropriate location.

 

[Lawrence R.]

I do not use effective age, as effective age is just another word for:



(and I have stated over and over and over and over and over)

Wait for it...




Just a little longer.....

















CONDITION!!!

 

[stefan olafson]

Greenbacks,

Effective age is not a function of the cost approach. Effective age is:

"The age indicated by the condition and utility of a structure" Page 112 The Dictionary of Real Estate Appraisal, 3rd Edition....

I use the example of a 110 year old (actual age) improvement that has been extensively renovated in the past three to five years. A part of the bone structure of the improvements is 110 years old and a part of the bone structure is less than five years old. Some of the interior walls are 110 years old and some are relatively new. The wiring from the street to the plug ins is relatively new. What is the effective age?

Not 110 years, not 5 years or less but something in between based on the overall condition of the property. It's more of a feels like opinion than a hard and fast number.

 

[Don Clark]

Greenbacks,

Effective age is not a function of the cost approach. Effective age is:

"The age indicated by the condition and utility of a structure" Page 112 The Dictionary of Real Estate Appraisal, 3rd Edition....

I use the example of a 110 year old (actual age) improvement that has been extensively renovated in the past three to five years. A part of the bone structure of the improvements is 110 years old and a part of the bone structure is less than five years old. Some of the interior walls are 110 years old and some are relatively new. The wiring from the street to the plug ins is relatively new. What is the effective age?

Not 110 years, not 5 years or less but something in between based on the overall condition of the property. It's more of a feels like opinion than a hard and fast number.

Can't add much to what Oly has said. But, I look at it as if it were one big clock. For easy referrence purposes here, let us assume a house built to last 6o years. OK, the clock has 60 minutes on it. The hands of the clock show 40 minutes since it was built, or 40 years, same thing. But, it has been remodeled, upgraded, repaired or rehabilitated, has appliances, wiring, plumbing, and interior and exterior finish to the point where it no longer looks like a 40 year old house or 40 minutes off the clock. So, based on what has been done, you can push the hands back....but how far? Can't push them to zero for the reasons that Oly has stated. But, you may push them back to 30, 20, or even 10 depending on what has been done, and how long you can estimate (remaining economic life) that it will continue to provide the utility that it does at present. Has nothing to do with the cost approach, and it would not change regardless of what it was compared to.

I do not know how anyone can honestly estimate the effective age of comparables unless you have inspected the interior and exterior of the comparables, or, like superman, you have x-ray vision.

Just one more example....I am 72, but my effective age is 35

 

[Fred]

Thread moved to more appropriate location.

The effective age section?

EA is just something someone stuck in an appraisal book long ago, and we have been stuck with it ever since.

 

[Greenback]

...I do not know how anyone can honestly estimate the effective age of comparables unless you have inspected the interior and exterior of the comparables, or, like superman, you have x-ray vision.

Love the clock analogy and Mr. Olafson's 110 year old house. I like effective age analogies. This quote right here is interesting, though. You said, "...how can anyone honestly estimate the effective age of comparables unless you have inspected the interior and exterior of the comparables..."

If not honestly, maybe extracted through an exterior inspection, MLS photos at the time of sale, and verification when paired (if all comparables were examined the same way)? Not honestly (exact), but roughly, when paired?

I really, really, like the clock analogy because it injects time directly. And, when compared with the the 110 year old house, the house itself is an example of time. Comparing the clock with the 110 year old house is pretty awesome. Thank you both for an anology.

Why can't the effective age of a comparable change when paired with different properties and by using a different subject? Doesn't time have a reflection effect and doesn't market behavior portray different attitudes when different substitutes are used, as well as, the subject property?

To what extent is the effective age not a function of the cost approach?

 

[stefan olafson]

The cost approach deals with Cost New (Replacement or Reproduction Cost) Less Depreciation (Affects from time and upkeep, function and design, and outside factors) Plus Land or Site Value PLUS Entrepreneurial Profit (If any)

Effective Age is based simply on Don Clarks explanation and mine. It's actually sixty or 110 years old but parts have been updated or changed and now the age is less.

A typically maintained property will have an effective age equal to its physical or actual age.

 

[Mztk1]

I do my best to extract my effective age from the market. There are a couple of ways to do it and each does involve estimating costs. As you can guess it is not perfect.

 

[Greenback]

...A typically maintained property will have an effective age equal to its physical or actual age.

What if the effective age is older than the chronological age? I know this is a basic question...(humor me?) Why would you, for any reason, declare an effective age is more than the property's true age?