FHA Condo - Economic lifespan of building?

[Josh Shapiro]

Ok, this is a first for me. The lender has requested that I determine the remaining economic life span of a condo highrise built in 2007. To do this would I not need to be able to analize Population Growth and City Redevelopment. Don't think im quite qualified to that that! Any advise?

 

[nstanbru]

I'm not familiar with your area, so I'm not sure if this will help. What they are asking you to do is to provide an estimate, in years, that the improvements will contribute to the property value. This is typically reflected by market reaction to a given property. Are there substantially older condo units in your area that are still selling? They may provide some indication. What about other types of residential properties? It is virtually impossible, IMO, to predict market conditions 30, 40 or 50 years in the future. Sometimes you have to use your best judgment based on your experience and knowledge of the area with the data you currently have to work with.

 

[Lloyd Bonafide]

Ok, this is a first for me. The lender has requested that I determine the remaining economic life span of a condo highrise built in 2007. To do this would I not need to be able to analize Population Growth and City Redevelopment. Don't think im quite qualified to that that! Any advise?

Required for FHA - give it your best shot.

 

[Mr Rex]

Required for FHA - give it your best shot.

Care to point that requirement out in the protocol? I can't find it. H&BU? Check. Effective Age. Check. Remaining Economic life? Can't find it. Thanks in advance.

 

[rowdydog]

i got nailed on this a couple of years ago. simple- life span of subject( i.e. 60 years) , current age of subject- wallah- remaining economic life. put in at least 2 places on all FHA loans( why so they an find it)

 

[VegasWayne]

You could do a cost approach for the high rise condo to determine replacement cost new and then determine the current market value of the improvements and then calculate the annual depreciation and finally determine how many years it will take for the improvements to depreciate to zero or you could state that it is 58 years and they won't know the difference.

 

[Couch Potato]

Care to point that requirement out in the protocol? I can't find it. H&BU? Check. Effective Age. Check. Remaining Economic life? Can't find it. Thanks in advance.

In the Cost Approach section for single family and manufactured homes you will find:

Economic Life * Enter remaining economic life of improvements (required for all FHA appraisals).

Now a reasonable person would likely say the statement only applies to single family and manufactured homes, but the parenthetical nature of the "required for all FHA appraisals" could lead someone to construe the requirement extends to condominiums. Given the statement in the MPR of:

Rejection may also be appropriate if the future economic life of the property is shortened by obvious and compelling pressure to a higher use, making a long-term mortgage impractical.

it would seem logical that one would need to evaluate the economic life in order to state the subject meets the MPR. FHA is mostly just wanting a statement that the economic life exceeds the term of the loan. They allow a range rather than requiring a specific number.

Can you give a range of economic life that exceeds 30 years? A major question for a Central Florida condo built in 2007 is how many units are still owned by the developer? There are Florida condominiums that are physically in new condition that have zero current economic life as a condominium. They will likely serve as apartment buildings. That does not mean their economic life as a condominium can not be 70 years in 2020. Condo appraisals in Florida is dangerous ground; I hope you charged accordingly.

 

[Mr Rex]

Perhaps you could start by showing me the Cost Approach section in the Condo forms:new_smile-l:

 

[Couch Potato]

Perhaps you could start by showing me the Cost Approach section in the Condo forms:new_smile-l:

It's about halfway down on page 7. :new_all_coholic:

 

[Mr Rex]

I thought so. Tired of taking it up the wazoo? Stop turning and bending over for your prison buddy.:icon_idea: