FHA form 1073 Condo - Remaining Economic Life

[Ted Martin]

Does FHA want the remaining economic life for the unit or the complex? Not all, but most of the condos I do the unit ownership is for the air space, drywall in and a fractional interest in the common elements which would include the box that the unit is located in.

Since finishes typically have a total estimated life of less than 15 years then the total estimate life for the unit could never exceed 15 years, which causes underwriters to have kittens on 30 year mortgages. If it's on the box and I have only inspected the unit and done a very limited exterior of the box, then the only source for the ERL is thin air.

By the way I've ask both the Denver HOC and Landsafe staff appraiser's this question and neither has an answer, and all have agreed that it isn't reasonable to ask the appraiser to provide this information. The only ones that respond differently have no answers but simply want to make the underwriter happy and not make a wave.

 

[Rufus]

When considering the ERL I assume typical, necessary maintenance will be performed and therefore list it at a minimum of 30 years that make UWs happy. Just add a statement about that assumption. (If the home is newer, then I will estimate a greater life.)

Around here, we have homes well over 100 years old. With proper maintenance they may be around another 100 years. ERL is just a WAG and should not be part of an appraisal, IMO. It belongs in the category of fortune telling.

 

[Couch Potato]

Since finishes typically have a total estimated life of less than 15 years then the total estimate life for the unit could never exceed 15 years, which causes underwriters to have kittens on 30 year mortgages. If it's on the box and I have only inspected the unit and done a very limited exterior of the box, then the only source for the ERL is thin air.

Your logic is seriously flawed. The value and economic life of such a condo is also based on the structure that encloses the air space, the land on which it sits and all the amenities, not just the space itself. For the most part the tangible part of a condominium is the common elements of which the unit owner holds a fractional interest which is inseparable from the right to occupy the unit. One does not evaluate just the unit or just the fractional interest as your logic implies.

You are quite right that assumptions about the entire condominium are made based on the viewing of the exterior and the viewing of a single unit. It is import for an appraiser to be sure those assumptions are reasonable. The research done into the budget and maintenance reserves of the project are part of justifying those assumptions. One must take the time to view the entire exterior structure, in the case of a multi-building complex that means looking at all the buildings that make up the condominium. In most condominiums the owner of an individual unit has an interest in all of the buildings, not just the one that houses their unit.

 

[Ted Martin]

Not so flawed that CW or HUD was able to tell me what they wanted in terms of the remaining economic life for the unit, building or complex as a whole. I'm three layers up in both organization and have been told to do nothing while they research the question of what they are asking for.

 

[Couch Potato]

At six layers up you should encounter someone with a brain.

 

[Ted Martin]

Well I got six up at CW and did not encounter any intelligent life form.

A Lndsf / CW VP told me that this was the simplest calculation in the world. I was to use an "Extraordinary Assumption" that in the future the building was going to be maintained. That the total economic life was 70 year and all I had to do was subtract the current actual age of 23 year and the remaining economic life was 47 years. Apparently if a question comes up then, the client is always right and we are suppose to do what ever they ask so the loan will close.