Effective Age

[Ross (CO)]

Mark, Why do you say subject is "approximately" 15 years old ? Do you truly not know as the county's records may be incomplete ? One should be able to say exactly how old the subject is (in most cases). I read in your wording that ...if there were no re-furbishments the house would simply have an effective age to match it's actual age. I never adjust for effective age in the grid analysis as I will not see the inside of comps like I will have seen the inside of the subject. One gets to draw judgements about comps from the exterior appearance they provide anyone "driving by". Some places truly look nicer and better than others. The other crutch is text support offered in an MLS listing concerning the condition and specifically those recent updates on which the buyers focus.....kitchen, baths, flooring, roof, furnace, et al. Then too, sometimes you learn that the "new" carpet was 11 years ago and the wind goes out of the sail. I know we are splitting hairs here now...but consider saying "an" effective age instead of "the" effective age in your addendum comment. To avoid the hook of specificity it is sometimes better to verbally comment to effective age as a reasonable range, like 5 to 10 years, or whatever fits the reality.

 

[Frederick R. Ruffell]

I almost never adjust for age but rather for condition and I always put a zero in the age field where the comparables age is different from the subjects, this lets the reader know that you did not overlook this issue. I then include the following comments in the addendum.

A zero (0) on the market grid indicates that an adjustment was not warranted.

Age and condition adjustments were computed together to allow the appraiser to account for actual age, effective age, renovation, and remodeling.

 

[BigBlueGA]

I think the reason that the execution of this adjustment is so varied is because realistically age and condition go hand in hand and are inherently tied to one another. That is the whole premise of effective age.

I feel like the URAR is flawed in this respect because of the way it tries to seperate the two. Same thing goes for site adjustments in many markets. Would it not be easier and less prone to under or over adjustment if site adjustments (view, site) were calculated on lot value individually for each sale?

Am I rambling? Am I making any sense whatsoever?

 

[Ross (CO)]

Brandon, Age and condition are surely linked, but "hand-in-hand" does not always rule. I have been in 5-yr old places which were trashed and ugly and 35-yr old places which were immaculate. One is an absolute eyesore and the other soothes the eyes so much it puts Visine to shame. This is clearly one of the prime reasons that a verification call to a listing or selling realtor, oops, Realtor, is sometimes definitely needed. The URAR does need some tweaking in a few places, just so it can be up-with-the-times. One place effective age comes up is on Pg. 1 and asks for your "best hunch" on just how old the subject "looks". Much like taking a walk after dinner, seeing a neighbor along the way, and commenting to yourself....He just had his 80th birthday last week but he doesn't look a day over 55 ! That's effective age as I interpret it. How old might a total stranger guess your subject house to be if they did not know anything factual about it....but simply took a 3-minute walk through all the levels of the home ? You get to play that role, except you get to know the facts about the house, and then get to state your hunch. One of the few places in the URAR where you get a little slack. Other than that, it's back to all facts. As for site adjustment, it is not always sq.ftg. vs. sq.ftg. and a need to find an adjustment to award simply because one lot is bigger. How about the larger lot which is half sloped (of its total area) and they "ain't" got no back yard ? You step 10' across the rear patio from the kitchen door and it's all UP from there. I apply what I call the "volleyball net test" to many places. If they can not set up and play a game of volleyball then I will be hard-pressed to accept that there is much special about a larger lot there----unless no home in the immediate neighborhood can pass the test. Then you have similarity. In many of these suburban tract developments the builders do stick it to folks on lot "premiums" because of size or shape or potential of view. You might try to learn what those premiums were at the time of sale and store that number away. A new place with a nice view from back yard today just might have a house of equal size blocking that view 8 months from now. Think about the prospective and future view before you award much for it.

 

[Pamela Crowley (Florida)]

Would it not be easier and less prone to under or over adjustment if site adjustments (view, site) were calculated on lot value individually for each sale?

I do this quite often. "*Location, Site and View line items have been combined and any adjustment deemed necessary and justifiable has been taken on the View line. The individual site values of the subject and all comparable sales were estimated per......."

If all are in the same subdivision with similar views but different sizes that can be tracked for differing values, it gets the size put in the grid and any necessary adjustment.

If all are in the same subdivision with similar size sites but different views (lagoon, golf, conservation area, etc) that can be tracked for differing values, it gets a view adjustment only.

Regarding Age and Condition: I do these very carefully. There are justifiable age adjustments when they are far enough apart that it shows up. After all other justifiable adjustments are made it's interesting to play with the grid adjustments for an individual line item. Sometimes I'll have 6 to 9 comps up on grid just to determine the justifiable line item adjustments. I'm sure this isn't as good as Austin's statistics, but it does work pretty well when you have enough comps and pay attention to what you're doing. Paired sales analysis, basically. Plus, covers my butt. I print out what I did and keep it in the back of the workfile.

 

[Richard Carlsen]

As I’ve posted before, I do not adjust for age but do my adjustments in the Condition line in the grid. Condition is based on visual perception and what data I have from the MLS sheet. (Comments like new carpet, fresh paint, new furnace, etc. plus the interior and exterior photos that are available on some of the MLS sheet help)

My comment in the Cost Approach is that the age/life method applies to economic life.

One other thing is that I rarely find a house where the Effective Age is equal to the Actual Age. Normal maintenance reduces the Effective Age automatically. If a house has an Effective Age that is equal to the Actual Age, we are usually in trouble with condition unless it is under 10 years old or so.

 

[jtrotta]

Agree with Richard on this one and the lady's

8)

 

[bradellis]

OK sports, fans- get your pencils and score cards ready:

Out texts say that effective age is subjective- based upon the appraiser's observation. I say, bunk.

Effective age can be derived from the market. I have provided that specific example on this forum before. Do it- don't guess. EVERYTHING we do should be based upon market derivation. It's simple and quick.

Do NOT show an effective age for your comps UNLESS you have fully inspected them. You cannot know their effective age unless you inspected them.

You can and should adjust for condition based upon what you know. If necessary use an extraordinary assumption about the comp condition (broker says it needs TLC so assumed to be in inferior condition). Talk to the brokers- they usually will tell you quite a bit.

Remember that the adjustment for condition reflects differences in short lived items and differences in actual age reflect differences in long lived items.

Brad Ellis, IFA, RAA

 

[Stone]

I'm confused. What is the difference between adjusting for condition on properties you haven't been inside, and adjusting for effective age on properties you haven't been inside. I look at effective age as a way to show a relationship in the condition of the comparable properties. That is how I was taught at the Appraisal Institute (I know, everyone's favorite organization), and that is how I was trained. I always explain that any condition differences are reflected under effective age. I don't see how this is any more unreliable/inappropriate than making an adjustment under condition.

 

[Farm Gal]

Do NOT show an effective age for your comps UNLESS you have fully inspected them. You cannot know their effective age unless you inspected them.

You can and should adjust for condition based upon what you know. ...

Brad: I think it splitting hairs to assume that one cannot adjust for effective age after talking to (assumed) responsible brokers in the area...

REAL data is necessary for adjustments (granted) the idjuts who ASSume condition based on sale prices should be horsewhipped :evil:

If secondary information indicates that a comps had full kitchen and both baths remodeled, new roof, new HVAC, siding, and new carpets not to mention interior and exterior paint... and so documented in the report... I would not have a problem with a review in which an EA adjustment were made...

(That said) I usually adjust in condition my self....

Just curious wherein it is writ that we cannot or should not adjust effective age IF we feel there is adequate cause to do so?