Effective Age

[mark peters]

I am reducing the effective age of my subject from 15 years to approximately 10 years due to good maintenance and re-furbishments. My comps appear to not have the same re-furbishments as my subject so I have used the actual ages for my comps. Adjustments were made to 2 of the comps. Here is the vebage in the addendum explaining the justification of the adjustments I made:

THE SUBJECT IS A SINGLE FAMILY RESIDENCE OF 1 STORY DESIGN, APPROXIMATELY 15 YEARS OLD. DUE TO GOOD MAINTENANCE AND RE-FURBISHMENT OF CERTAIN ITEMS, THE EFFECTIVE AGE OF THE SUBJECT PROPERTY HAS BEEN REDUCED TO APPROXIMATELY 10 YEARS.

I am wondering if this is appropriate. (I kept the effective age of my comps the same as the actual age)
Thanks

 

[larryhaskell]

Mark:

Why did you make adjustments to only two of the comparables if they were the same age and condition? I would try to find a sale that was actually 10 years old to avoid an across the board adjustment even if you have to look in another development or market area. I believe your comments are adequate if you find one sale that is more similar to your subject.

 

[liznindy]

Mark,

Why not list the actual age of the subject and comparables on the grid and make adjustments for the subject's updates on the CONDITION line?
(I am assuming the subject and comparables ages to be similar).

I am one appraiser (may be the only one) who does not list an effective age for either subject or comparables on the grid. I do not understand the reasoning for adjustments for effective age when what the appraiser is really talking about is condition!

I make age adjustments (if warranted) based only on age....and condition adjustments (if warranted) on updates and improvements. This is much simplier and makes more sense (in my humble opinion).

 

[liznindy]

Mark,

As to the comments for the condition adjustment applied for updates....I list the updates offered by the subject when explaining the adjustments applied.

 

[Judy Whitehead (Florida)]

I would be specific about the remodeling and upgrades, such as newly installed wood flooring, new roof, new air conditioning, etc. and then make the comment that this is reflected in the estimated reproduction cost and effective age of the subject.

I quote from the Appraisal Institue textbook: The effective age is the age indicated by the "condition" and "utility" of the subject. Similar buildings do not necessarily depreciate at the same rate. The maintenance standards of owners or occupants can influence the pace of building deterioration. If a building has received typical maintenance, its effective age and actual age may be the same. Effective age is related to remaining economic life.....etc.

In other words, the effective age can be affected by the condition and the utility of the subject. I always assumed ( :roll: ) this could mean "physical condition."

The only time I make adjustments in the condition grid is for exceptionally good condition properties, or fair or poor condition properties.

 

[Jo Ann Meyer Stratton]

I agree with lisnindy. I post the actual original year of construction on the subject line and for each comparable. If I do make an adjustment on that line it is for the appeal differences between todays reaction to the floor plans, etc that was constructed at the time of original construction versus the subjects. I never use effective age (effective age is a dart thrown at a dart board--and where do you throw for the comparablesit if you haven't seen the interior of them!). I will make adjustments on the condition line or the design or the appeal lines--items that are facts. For example ranch with long hallways versus contemporary or tile roof versus built up roof or in condtion--the roof or flooring or interior or exterior, etc actual conditions (remodeling/renovation or lack of remodeling/renovation). My opinion of effective age could be completely different than the buyer or sellers ideas. New/good condition or old flooring in poor condition is a fact that can be determined. Avocado green shag carpet in excellant condition would be an appeal adjustment, not an effective age. etc, etc,

 

[Pamela Crowley (Florida)]

I agree with liznindy and Jo Ann.

 

[Dee Dee]

And I agree with all of the gals above.
I've never heard of anyone adjusting by effective age. I adjust by actual year of construction and condition on the grid. Effective age can be addressed in the addendum section and/or in the Comments section of the Cost Approach on the 1004 forms.

Dee Dee

 

[Pamela Crowley (Florida)]

I've never heard of anyone adjusting by effective age.

This was one of the things my X supervisor used to do to make a value. It can also cause a review.

 

[Restrain]

I have seen effective age adjustments and some textbooks actually teach effective age adjustments. My trainee wants to make these and I have had to beat her severely (verbally of course) about it. If you want to adjust for age (20 years vs. 40 years) that can be supportable from paired sales in the market. So can condition and updates. The only time I use Effective Age is in the Cost Approach, and I extract that from the market. In that case, effective age is reflective of condition. But it's easier to support for the Cost Approach than in the Direct Sales Comparison Approach.