Effectve Age

[Terrel L. Shields]

The OP titled this thread "EFFECTIVE AGE" and added no further terms in his post.

Such a short little post and opened such a big can of worms for folks Thanks @NJAPRAZE . Sometimes we need a simple concept to get a good airing out.

Yep, EA - a term apparently FNMA wants us to ignore regardless how important it is.

 

[J Grant]

.

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!

You did it again - your version of the truth is "I sling garbage with every post" _ I've given a lot of good advice over the years and maybe some not-so-good but a number of appraisers have thanked me for helping them. I;ve been a successful appraiser for close to thirty years including doing diverse property assignments including high-value (over $10 million range ) and reviews.

You key on a word I used one time "economic age" to disparage all the other posts I made on this topic. Idk what your mental issues are, but if spewing bile toward strangers here relieves some pressure perhaps it serves to deflect greater harm-

 

[glenn walker]

The facts are its an issue which is almost impossible to define on a forum. The old text book taught us a theory that seldom works well in a real life event. This is why the cost appraoch in my area tends to almost always be irrelevant as the appraiser is almost always way off on Depreciated Physical Age which he/she then arrives at a Effective age which is not even close. Unfortunate because F & F does not allow a EA that would say most single family homes are updated or remodeled, often numerous times over say a 75 year period. Ones that have not had any updating, maintenance, may end up as the Depreciated Physical age being similar to the effective age. BUT thats rare unless its near being a tear down .

The real factor is its economic life and utility life which can be way different than its theoretical effective life. For this reason outside of New Construction the cost appraoch may not work real well, because 90% of all Appraisers simply do not have the construction background to do a cost approach. This is why back in the day we had all been trained it was 30 years remaining life as that was the length of the mortgage being taken out

 

[TerryRohrer]

You did it again - your version of the truth is "I sling garbage with every post" _ I've given a lot of good advice over the years and maybe some not-so-good but a number of appraisers have thanked me for helping them. I;ve been a successful appraiser for close to thirty years including doing diverse property assignments including high-value (over $10 million range ) and reviews.

You key on a word I used one time "economic age" to disparage all the other posts I made on this topic. Idk what your mental issues are, but if spewing bile toward strangers here relieves some pressure perhaps it serves to deflect greater harm-

I guess I should blame the OP for what you post, huh? For the record, I respond to what is written here. If someone else posted what you posted, I would express the same objection in the same way. Your assumption that I am focused on "you" with any emotion whatsoever, much less hatred and bile and vitriol and the like is a fabrication of your egomaniacal, narcissistic need to be the only voice in the room. So, the floor is yours! Carry on!

 

[Basically Rectangular]

So you're saying my analysis is incorrect? That the data you provided actually shows a TEL of 81 years, not a TEL of 55 years (as suggested by the cost book). In order to have a TEL of 55 years, the annual depreciation would have to be around 1.8-1.9% per year, right?

I'm not saying that your analysis is incorrect.

I believe that you are assuming a straight line depreciation.

 

[Basically Rectangular]

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

Right. This is merely an example of a tool which we may choose to use for a particular job.

This is not the holy grail of appraising. Apply the right tools for the job.

 

[TerryRohrer]

The facts are its an issue which is almost impossible to define on a forum. The old text book taught us a theory that seldom works well in a real life event. This is why the cost appraoch in my area tends to almost always be irrelevant as the appraiser is almost always way off on Depreciated Physical Age which he/she then arrives at a Effective age which is not even close. Unfortunate because F & F does not allow a EA that would say most single family homes are updated or remodeled, often numerous times over say a 75 year period. Ones that have not had any updating, maintenance, may end up as the Depreciated Physical age being similar to the effective age. BUT thats rare unless its near being a tear down .

The real factor is its economic life and utility life which can be way different than its theoretical effective life. For this reason outside of New Construction the cost appraoch may not work real well, because 90% of all Appraisers simply do not have the construction background to do a cost approach. This is why back in the day we had all been trained it was 30 years remaining life as that was the length of the mortgage being taken out

There was a time that I relied on effective age and carefully developed it for the subject and comps, but no longer use the term. I have seen others claiming to use it when they are simply using the term to disguise misleading, unsupported adjustments. Since it has to be reported in the 1004, my preference is for the quickest and most defensible estimate I can arrive at. In the cost approach, I rely on the most comparable sales (similar chronological age with similar updates of similar age) to develop an indication of overall depreciation. In the SCA, I adjust for those differences which can be measured and adjustments supported, and then account for condition/effective age/quality differences in my reconciliation.

 

[alebrewer]

I'm not saying that your analysis is incorrect.

I believe that you are assuming a straight line depreciation.

Huh? I'm using accumulated depreciation to calculate TEL based off actual age. That is not 'straight line'... Now - I can see where one could argue that the implied REL is straight line, but that's yet another reason I don't trust the CA.

 

[Terrel L. Shields]

I believe that you are assuming a straight line depreciation.

By definition it is a straight line depreciation. The ultimate TEL is not relevant if all else is uniform. That is consistent between the comps and the subject.

 

[Basically Rectangular]

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.

What in the world are you talking about suggesting that someone doesn't know the difference between effective age and economic life? Where did you come to this conclusion??? Have you taken your meds today?