Effective age

[Greenback]

Good question.

Simple answer: There is no logical reason to equate 60 years life expectancy to the home.

What about the quality of construction? Monolothic slabs vs' new technology, etc..?

Would location and path of progress assist in a logical reason to apply a higher expectancy life than 60 years old, compared with inferior locations and migration, with same actual ages (even similar) that have withstood time, say 60 years?

 

[Mztk1]

Do you think Inflation is curable?

Do you mean, Do I believe that if we through enough money at the banks and big money suppliers the markets will turn around to an aggregated surplus? That's supply side economics. We'll see I guess.

Or if you though what I said about "depreciation is at the same rate" was relevant to market conditions/inflation and deflation, it wasn't. I was speaking specifically about physical depreciation.

Is uniqueness curable?

[/quote]

Depends.

 

[Lawrence R.]

For the EA supporters.

Do you make adjustments for differences in Effective age on FNMA forms?

 

[Mztk1]

I have a question. Suppose you have two houses that are identical in age, design, quality and conditon. One is in an area undergoing gentrification. The other is in a neighborhood of similar houses, but is not undergoing any significan renovation/gentrification.

Since they are identical in physical characteristics, are the effective ages the same?

Yes.

An area that is going through gentrification may have higher demand and therefore higher land values resulting in a higher value, but the effective ages should be the same.

On the other hand, the condition ratings may differ and this is where "effective age" is not necessarily consistent with condition rating. Condition is relative to the market. If the effective age for both is 12, in the gentrifying area an effective age of 12 may be average, but in the other neighborhood the average effective age might be 20 or 25. So in the first section the condition of the house relative to the market (which is what we put on the grid) is "average" but in the second it is "good".

 

[Greenback]

Ok, guess I should chime in....

Remaining Economic Life is a theory, it's a guess on the part of the appraiser. The question really should be..."how long do you think the improvement will contribute to value?".

Effective age, on the other hand, can be proved...though seldom is. It is, in effect, how has remodeling or updating, affected the perceived age of the property?

That sounds like something my mentor would say. That's a good way of explaining or questioning what an effective age may be. I think its a lot deeper than that, though. It's a judgement call at best, yeah, maybe - or it can actually be logical? however, there are enough facts that drives the issue, and demands attention.

 

[Greenback]

Do you mean, Do I believe that if we through enough money at the banks and big money suppliers the markets will turn around to an aggregated surplus? That's supply side economics. We'll see I guess.

Or if you though what I said about "depreciation is at the same rate" was relevant to market conditions/inflation and deflation, it wasn't. I was speaking specifically about physical depreciation.

Well, land is fixed. Inflation would have to come to the location. What would inflate a piece of Real Estate? Over speculation, known defects that aren't disclosed, the status of interest rates at times, lack of insight and too much perception, no updates etc..but clings to a location with drifts of high prices over a season or two; these factors maybe? There is an inflation rate tied to indexes, etc.., and sometimes location plays a big part. What can make a piece of real estate inflate and, inflate pass an average rate. Inflation is needed, but too much can be serious. I don't think too much inflation is curable and it affects an effective age because too much inflation affects human behavior. Inflation is affecting all of our behavior in the country as of right now?

Do you think a condition adjustment is easier left to minor deferred, physical, curable items and Effective age could represent incurable physical items, external influences, market conditions that are not part of any elements of comparison, incurable functional depreciation and maybe include small affects of all elements/units of comparisons, and much more?

When would uniqueness be curable?

 

[The Bob]

Yes.

An area that is going through gentrification may have higher demand and therefore higher land values resulting in a higher value, but the effective ages should be the same.

On the other hand, the condition ratings may differ and this is where "effective age" is not necessarily consistent with condition rating. Condition is relative to the market. If the effective age for both is 12, in the gentrifying area an effective age of 12 may be average, but in the other neighborhood the average effective age might be 20 or 25. So in the first section the condition of the house relative to the market (which is what we put on the grid) is "average" but in the second it is "good".

I see your point, but disagree the EA would be the same. I think effective age is also relative to the market.

 

[Lawrence R.]

Do you think a condition adjustment is easier left to minor deferred, physical, curable items and Effective age could represent incurable physical items, external influences, market conditions that are not part of any elements of comparison, incurable functional depreciation and maybe include small affects of all elements/units of comparisons, and much more?

When would uniqueness be curable?

Could these underlined items be accounted for in the quality of construction adjustments on the sales approach?

 

[Greenback]

Could these underlined items be accounted for in the quality of construction adjustments on the sales approach?

Define quality of construction?

 

[Mztk1]

I see your point, but disagree the EA would be the same. I think effective age is also relative to the market.

I think you're right. No. As I think about it, I know you are right. I just goes against my first intuition.