Total Economic Life - Remaining Economic Life = Effective Age
Typical Life Expectancies can be found in Marshall & Swifts. Are they accurate? Who Knows, certainly not out here on the West Coast. Are they reasonable? for an Appraisers use in mortgtage origination? yes.
The type of feedback I'm looking for. I find that they are not accurate here, either. For example, there are homes here built in the 60's called national homes, that people would say would never last for 20 years, and people are still buying them and putting money into them every day. I was curious how much the M&S actually applies!
Peggy, ......The effective age determination is one of the few subjective calls you get to make for supplying that input in that form field. It's your guess, your call, your gut-feeling rolled into one. It can be expressed as a single year/age, or it can be presented sometimes as a short range spanning a gap of perhaps 5 to 10 years for a much older home. I do not believe that one can come back and say you are wrong with your answer.....but in reality, 5 other appraisers could come by and re-inspect that same house the day after you were there.....and come up with 5 different replies to your's (yet similar in their own right). Time and experience with many properties will make it easier for you to offer that judgment. There is a definite merger between regular maintenance and typical updating, that occurs over time, for a property to have "old" actual age and "young" effective age. Very likely you will need to make appropriate comments about condition and updating (if it has had any) to support yourself anyway.
There are simply too many properties which have undeniable aspects of actual age (of construction) that tell you the overall property has "been there" for quite a few years......even if the kitchen's vinyl flooring and its dishwasher were replaced just last month ! It is fair-game to disregard tall trees and very mature landscape. We are talking about the house, but it is the entirity of the structure, so alot of aspects are rolled into your call. Or, in other words, if you knew none of the facts about the house before you drove out there, then walked through the front door and did a basic walk-through of the interior and walked around the yard and viewed all four sides......how old would you say the house is ? Then you look at county records and it says "Built in 1965". You say, "Wow, I might have guessed it was built in, maybe, say, 1985 to 1990" Bingo, effective age. As for remaining life.....there are so many homes which surpass that 65 to 70-year "typical" lifespan that anyone's ability to nail that call down is more than an appraiser....they are possibly kin to Moses. Just keep the number of ">=30" in your thoughts ...... unless, of course, you feel the house will fall over in the next heavy torrential rainstorm to pass through town ! Numbers less than 30 get some clients and investors really nervous.
Pick up and read the M&S and find what they say about your particular type of construction,
I think the typical life expectancy for site built frame houses is 70 years. Out here in CA we have a lot of houses that are 100+ years, but most of the time 70 years is acceptable and reasonable. Peggy be more specific about your "national" homes. What is it? 2x4 frame construction on slab? 2x6 consruction on post & pier? 2x4 20gage steel on compensating concrete perimeter foundation? Manufactured home on Masonary units? etc...
Speaking of M&S, my supervisor has the online access, but I have limited access because of others using it. I need to get a hardcopy at home. I was just at the M&S website. There are tons of products. Which ones do I start with to guide me? Which ones have the adjustment guidelines, talk about actual vs effective life?
Effective age is an educated guess and takes into account that a typical homeowner would periodically update their residence over the years and perform typical maintenance. This affects the remaining economic life. Look at the neighborhood.....Are homes typically updated, remodeled, etc. ? Is gentrification taking place? This will give you an idea of effective age vs actual age and thus remaining economic life. For me, there is no actual formula that satisfies every situation. I always use both Actual age and Effective age in the Sales Comparison Grid.......That way I can account for updated/remodeled/well maintained older homes that I am using for comparables.
Over the years of using the Age-Life Method, I've gradually moved from 60 years total life to 75 and now use 100. This allows the effective age (totally an estimate by the appraiser) to be closer to the actual age.
When the actual age of a property is over 25 to 30, I start looking for major systems that have been upgraded, changed out or need to be. Systems like older furnaces, water heaters, shingles, older windows, sometimes siding, etc. The more upgrading and good maintenance, the lower the effective age. That's why a 100 year old house can have an effective age of 30. IMNSHO it could go on for another 70 years.
Effective age estimating is something you just have to get used to doing.
I've appraised some houses that are 100+ years old and, because of new mechanicals, extensive updating, and excellent maintenance, will be around another 100 years. On the other hand, I've appraised some houses that are 10 years old that will be lucky to make it through another Wisconsin winter. I think you have to really check the foundation, check the mechanicals, check roof and flooring, walls for cracks, etc. and then make a fair and reasonable call. M&S gives guidelines but is not a substitute for what your own eyes and experience are telling you.