Effectve Age

[Gobears81]

Market sale abstraction utilizing replacement cost (from American Society of Appraisers)

Sale price less land value from comparable sale = Depreciated Improvement Value
Calculate Total Replacement Cost for comparable sale

Total Replacement Cost - Depreciated Improvement Value = Total Depreciation
Total Depreciation / Total Replacement Cost = Percentage of Depreciation of Improvements

Total Economic Useful Life x Percentage of Depreciation of Improvements = Effective age estimate

Repeat for your comparable sales and you get a range which you can use to support you effective age estimate.
Set it up in a spreadsheet and it is quickly developed.
View attachment 72602


You need to know: land values, replacement costs, total economic useful life of comparable sales.

Nothing wrong with your table. But I've always felt that this type of calculation was oversimplifying depreciation and suggesting that all three forms directly vary with age.

External/ economic obsolescence: No change with age
Functional obsolescence: Becomes more significant over time, but can certainly be prevalent from Day 1

This leaves physical depreciation as the only item that is mostly dependent on age. But I've seen misuse of these types of calculations, as newer properties with economic obsolescence suggest a high depreciation per year, which is applied to older properties and depreciation is overstated

 

[alebrewer]

? He has it against other people too? Lol and I thought I was special to get this level of toxic hatred from an internet poster I never met.

Nope - you don't corner the market WRT his vitriol

 

[glenn walker]

I see this heading to a "Price Versus Value" debate and a debate on defining the definitions

 

[TerryRohrer]

Nope - you don't corner the market WRT his vitriol

Vitriol? Gee, sensitive much? Sorry to all I have offended. I made a mistaken assumption that poster's here were all adults.

 

[glenn walker]

Vitriol? Gee, sensitive much? Sorry to all I have offended. I made a mistaken assumption that poster's here were all adults.

Please define adult !- Is that an approved word to use and is it gender neutral

 

[alebrewer]

Vitriol? Gee, sensitive much? Sorry to all I have offended. I made a mistaken assumption that poster's here were all adults.

I will break my decision to not engage you this one time. There is a difference in being an adult and being ok with other folks being mean. Those are not the same thing. The fact that you endorse AGA says quite a lot - and is not surprising in the least.

 

[glenn walker]

I will break my decision to not engage you this one time. There is a difference in being an adult and being ok with other folks being mean. Those are not the same thing.

Where is GH when you need him--the only real expert on this issue and he can Mansplain it to JG LOL

 

[TerryRohrer]

So you think the OP by not understanding the difference between effective age and economic life and thinking they are the same, is worse than my using in one post the term economic age ( which I explained is for addressing economic life).

With this post and in the past you have shown a nasty personal vendetta wrt me which has nothing to do with the appraisal topics being discussed. I doubt you are capable of a tiny effort of introspection wrt why your toxic hatred informs your posts here. The toxicity factor is creepy approaching the level of scary.

The OP titled this thread "EFFECTIVE AGE" and added no further terms in his post. That you can convert that to a confusion between effective age and economic life and try to force everyone to think your creation of the totally senseless term "economic age" clarifies anything is entirely on you. But, as usual, blame someone else for pointing out such fabrications and whine about being attacked. That is what the children do. I am just trying to ensure that the garbage you sling at every post in here doesn't infect the young minds who might come here to learn how to do things right, and to think clearly. But, carry on!

 

[Terrel L. Shields]

I disagree the economic life is always less than physical age.

Economic or Effective? In the "Great Recession" we has houses that had an effective age half that of their actual age turn into effective ages higher than their actual age because of market conditions which I would attribute to external obsolescence. By definition Total economic life has to be less than its Total physical life but effective age is based on accrued depreciation.

I've always used reciprocals to calculate TEL.

Yep, best way. The observed effective age is an observation dependent upon your judgment, and the tables are based on their own depreciation data. So it isn't "bad" per se. And it tends to be a power law curve, not straight line. Houses depreciate very little at first and at the end of life. The problem lies in the fact very few houses are static in their lives. They get major renovations, additions and updates usually about every 15 years or so, maybe less.

Add to that the fact that some of the finest of mansions last only 40 years because the site is so valuable, someone buys the property and then tears it down and builds what they want. Expendable money I suppose.

External/ economic obsolescence: No change with age

"economic obsolescence" defines the Great Recession. So I respectfully disagree. EO can crash the effective life when credit seizes up and homes sell for pennies on the dollar. That is the very definition of "economic" obsolescence in my book.

 

[TerryRohrer]

I will break my decision to not engage you this one time. There is a difference in being an adult and being ok with other folks being mean. Those are not the same thing. The fact that you endorse AGA says quite a lot - and is not surprising in the least.

Where did I "endorse" anyone? I provided someone with options for addressing their problem. But since you are being an adult, please explain what your claim of my endorsement of AGA says.