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Effective Age
- Thread starter mark peters
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Terrel L. Shields
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True "straight line" depreciation is not the norm over say a 70 year total life, with most depreciation coming in the last few years. But over a short haul (5-10 years) graphed on paper the line is basically "straight" and we are talking about adjustments which should be within a few years apart.
I would question the judgment of using a comparable with more than 5 years difference in effective age, because it suggests an adjustment that is quite large.
In explaining "average", it is a judgment call just like "condition". But, as I recall, the instructor suggests average means the exterior is maintained, the appliances function, and interior items are replaced as needed, etc. whereas above average may imply serious remodel of bath or kitchen, extensive remodel (like whole house carpet or appliances prior to the normal life of same) even to the point of excess. Below average maintenance would suggest things like not fixing broken items. Extreme worn or soiled carpets not being replaced, broken windows, damaged doors, walls, flaking paint, etc. In other words, functional items needed to be fixed.
The value of a property would be independent of its occupant - and reporting otherwise would likely violate federal discrimination laws. As for Hell's Angels. The average HA is about 50 years old, and many are well over 60. They have become pretty mainstream in the Biker world, perhaps a little more liberal than average folk on drugs and booze. Last week, they were in Gunnison, CO. The Gunnison police made only one or two arrests for public intoxication, otherwise pretty much average bunch of conventioneers having a good time in the Rockies. I doubt they make that bad of renters, though you might have to hire a rival gang member to evict them and hope there is a house left afterwards!!
ter
I would question the judgment of using a comparable with more than 5 years difference in effective age, because it suggests an adjustment that is quite large.
In explaining "average", it is a judgment call just like "condition". But, as I recall, the instructor suggests average means the exterior is maintained, the appliances function, and interior items are replaced as needed, etc. whereas above average may imply serious remodel of bath or kitchen, extensive remodel (like whole house carpet or appliances prior to the normal life of same) even to the point of excess. Below average maintenance would suggest things like not fixing broken items. Extreme worn or soiled carpets not being replaced, broken windows, damaged doors, walls, flaking paint, etc. In other words, functional items needed to be fixed.
The value of a property would be independent of its occupant - and reporting otherwise would likely violate federal discrimination laws. As for Hell's Angels. The average HA is about 50 years old, and many are well over 60. They have become pretty mainstream in the Biker world, perhaps a little more liberal than average folk on drugs and booze. Last week, they were in Gunnison, CO. The Gunnison police made only one or two arrests for public intoxication, otherwise pretty much average bunch of conventioneers having a good time in the Rockies. I doubt they make that bad of renters, though you might have to hire a rival gang member to evict them and hope there is a house left afterwards!!
ter
Stone
Elite Member
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- Certified General Appraiser
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Ross - I do not adjust for condition, because I explain that it is taken into consideration under effective age. I think we probably use very similar methods, but we adjust in different parts of the grid. My question, which I think Frederick answered very well, was why was it OK to adjust for condition, but not effective age without going into every comp. What I now understand is that some appraisers make an adjustment under effective age, and some under condition. I did not get that this was the difference when I asked my question.
As for my AI instructions, we were told to adjust for age using the effective age, and that a good way to do that is by using a range of years. I would not use a comparable for a typical appraisal that was so different in condition as to warrant a large adjustment (which I would make under effective age). I believe this is the same way most people look at condition adjustments. It is just where I put the adjustment. And I do explain it all in the report. I haven't had a question about this, yet.
I do a fair amount of narrative appraisals, and one thing that I have learned is that the URAR form is redundant. When I do narrative appraisals I am not stuck filling in a bunch of lines that may or may not be necessary for the assignment at hand.
I hope that made sense. It was a long hot day.
As for my AI instructions, we were told to adjust for age using the effective age, and that a good way to do that is by using a range of years. I would not use a comparable for a typical appraisal that was so different in condition as to warrant a large adjustment (which I would make under effective age). I believe this is the same way most people look at condition adjustments. It is just where I put the adjustment. And I do explain it all in the report. I haven't had a question about this, yet.
I do a fair amount of narrative appraisals, and one thing that I have learned is that the URAR form is redundant. When I do narrative appraisals I am not stuck filling in a bunch of lines that may or may not be necessary for the assignment at hand.
I hope that made sense. It was a long hot day.
Terrel L. Shields
Elite Member
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Michael said >>good way to do that is by using a range of years<<
Agreed. I generally refer to them as 5-10, 10-15, etc. and will not normally use a 5-10 to comp with anything but another 5-10 or 10-15
but teaching my subs to do likewise is as difficult as pulling teeth from a shark without losing a finger.
Agreed. I generally refer to them as 5-10, 10-15, etc. and will not normally use a 5-10 to comp with anything but another 5-10 or 10-15
but teaching my subs to do likewise is as difficult as pulling teeth from a shark without losing a finger.
Sorry, folks- not buying most of this.
The effective age of a home combines both its condition and its actual age. Rafters may never wear out; carpet almost always does.
THAT IS WHY there are two separate lines in the grid- one for those items that are long lived (age) and the other for short lived (condition).
In Lee Ann's example- every one of those items is short lived- every one, except perhaps for the "siding" and that type was not specified- but if the home is still being put to its intended use, we do know- for certain, that the original siding did not last as long as the overall dwelling and would, therefore, be short lived.
You can have two homes- 80 years old and 40 years old that have both been totally renovated. Everything the same in terms of size, site, utility, appeal, etc. IF the older one sells for less it is due to age; hence, an age adjustment.
Or, you can have 2 model matches side by side- one renovated and the other not. If the renovated one sells for more it is condition.
Note I said IF- nothing is automatic. you cannot qualtify what only a singel seller/buyer pair do- only what the market does.
The URAR grid does not ask for effective age- its asks for age on one line and condition on the line below- not effective age.
For our AI friends, remember that they were the ones who promulgated this as a subjective call. I've never believed it- never will. Why on Earth would you go to all the trouble to derive every other detail from the market and then NOT do it for effective age?
Bunk, I say, Bunk.
Brad Ellis, IFA, RAA
(AKA Don Quixote)
The effective age of a home combines both its condition and its actual age. Rafters may never wear out; carpet almost always does.
THAT IS WHY there are two separate lines in the grid- one for those items that are long lived (age) and the other for short lived (condition).
In Lee Ann's example- every one of those items is short lived- every one, except perhaps for the "siding" and that type was not specified- but if the home is still being put to its intended use, we do know- for certain, that the original siding did not last as long as the overall dwelling and would, therefore, be short lived.
You can have two homes- 80 years old and 40 years old that have both been totally renovated. Everything the same in terms of size, site, utility, appeal, etc. IF the older one sells for less it is due to age; hence, an age adjustment.
Or, you can have 2 model matches side by side- one renovated and the other not. If the renovated one sells for more it is condition.
Note I said IF- nothing is automatic. you cannot qualtify what only a singel seller/buyer pair do- only what the market does.
The URAR grid does not ask for effective age- its asks for age on one line and condition on the line below- not effective age.
For our AI friends, remember that they were the ones who promulgated this as a subjective call. I've never believed it- never will. Why on Earth would you go to all the trouble to derive every other detail from the market and then NOT do it for effective age?
Bunk, I say, Bunk.
Brad Ellis, IFA, RAA
(AKA Don Quixote)
Frederick R. Ruffell
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Brad,
Rafters can and do wear out especially if termites or powderpost beatles are eating them, and regular maintenance (i.e. fumigation) is not performed. This goes for all other pieces of wood in a structure. Metal studs rust if not kept dry by regular maintenance (i.e. sealing up any leaks present in the outer membranes and/or not providing adequate ventilation through said membranes). Brad I have appraised 100+ year old houses with little maintenance that still are habitable and marketable so the use of a 70 year (or 60 or 50) life span is completely arbritary so there goes your depreciation right out the window.
Again I say, I have no better answer than yours or the other posters I am just playing the devils advocate for the sake of argument.
Rafters can and do wear out especially if termites or powderpost beatles are eating them, and regular maintenance (i.e. fumigation) is not performed. This goes for all other pieces of wood in a structure. Metal studs rust if not kept dry by regular maintenance (i.e. sealing up any leaks present in the outer membranes and/or not providing adequate ventilation through said membranes). Brad I have appraised 100+ year old houses with little maintenance that still are habitable and marketable so the use of a 70 year (or 60 or 50) life span is completely arbritary so there goes your depreciation right out the window.
Again I say, I have no better answer than yours or the other posters I am just playing the devils advocate for the sake of argument.
Folks,
I just happened to read a post under "urgent" from Keri whose mentor is on vacation.
Judy Whitehead replied with an excerpt from Henry Harrison's book:
"The Condition line includes the appraiser's opinion of the subject property's condition (whether good, average, fair or poor), comparison ratings (superior, equal or inferior) for the comparables and adjustments made as indicated by the market.
The Condition adjustment should be limited to items that have not already been included in the Age adjustment. It would be a mistake to increase the effective age of a residence because of its condition and also make adjustment here for the same condition factors.....
His suggestion is to include curable items of depreciation in the condition grid and incurable items in the age grid."
Note: curable items are short lived and incurable items are long lived.
Have a great day.
Brad Ellis, IFA, RAA
I just happened to read a post under "urgent" from Keri whose mentor is on vacation.
Judy Whitehead replied with an excerpt from Henry Harrison's book:
"The Condition line includes the appraiser's opinion of the subject property's condition (whether good, average, fair or poor), comparison ratings (superior, equal or inferior) for the comparables and adjustments made as indicated by the market.
The Condition adjustment should be limited to items that have not already been included in the Age adjustment. It would be a mistake to increase the effective age of a residence because of its condition and also make adjustment here for the same condition factors.....
His suggestion is to include curable items of depreciation in the condition grid and incurable items in the age grid."
Note: curable items are short lived and incurable items are long lived.
Have a great day.
Brad Ellis, IFA, RAA
Frederick R. Ruffell
Senior Member
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Ok Brad,
I like what Henry is laying down, but he is saying esentially the same thing we all are saying. Don't double dip, he makes two adjustments based on curable vs incurable deficiencies (other than external deficiencies I am sure). Some of us (my self included) like to combine the deficiencies into one adjustment.
I like what Henry is laying down, but he is saying esentially the same thing we all are saying. Don't double dip, he makes two adjustments based on curable vs incurable deficiencies (other than external deficiencies I am sure). Some of us (my self included) like to combine the deficiencies into one adjustment.
officepolicy247
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:roll: Here's a little country theory. Even though not typically weighted heavily, the cost approach includes a number for the appraiser's opinion of the overall economic life of the property, say 60 years. Even though we don't always know the answer, let's assume a 30 year loan is in the works. If the actual age of the improvements is 45 years, then the numbers don't add up. In more rural markets, the lenders like to see an apparent remaining economic life at least as long as the term of the loan. I think that a new 40 year roof on a 40 year old home has an impact more evident than a "condition" adjustment, and "effective age" is just the place for it. Works for me.
Terrel L. Shields
Elite Member
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>>URAR grid does not ask for effective age- its asks for age on one line and condition on the line below- not effective age<<
Actually Brad my software allows me to state whether I use effective or actual age, while Fannie Mae expresses their interest only in what the relationship is between age and effective age as an indicator of condition. (pg 26, The Appraisal Guide, 1992, and sec. 402.09 Property & Appraisal Analysis, same Guide)
Actually Brad my software allows me to state whether I use effective or actual age, while Fannie Mae expresses their interest only in what the relationship is between age and effective age as an indicator of condition. (pg 26, The Appraisal Guide, 1992, and sec. 402.09 Property & Appraisal Analysis, same Guide)
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