Question about age adjustments

[Texican1986]

Good morning everyone. I am a real estate agent from South Texas and I have a question. If you have a property that was built in 1904 but remodeled in 2005 and the only comps you can find are things built in the 80s in the 90s how do you adjust for the age? While the property was built in 1904 due to its remodeling and updating it is in better condition than most of the properties built in the 80s and 90s which is why I'm not sure exactly how to adjust for age or explain why there is no adjustment. I am trying to work on a broker price opinion for this property and this has me stumped.

 

[alebrewer]

IMO, the most similar sales available are, by definition, comparable sales. That said, I'm hesitant to compare renovated older homes to new homes due to the functional differences. Usually older homes - even when renovated - have smaller closets, 'closed' traffic flow, smaller bathrooms, galley kitchens, etc. to the point that - potentially - they would appeal to two different markets.

That said - and in today's environment where supply is so low - those preferences may bear no weight at all.

 

[Terrel L. Shields]

Sometimes you may have to simply make a determined adjustment based on observation. But if you have any similar sales of older homes remodeled you can extract an "effective age" by subtracting the land and site improvements contribution from the sale price (of these comparables.) The remainder is the contributory value of the subject. That, in turn, means a current price as if new (replacement cost new - not reproduction cost). Example

Sale $300,000
Land & site value $70,000
Net to dwelling $230,000
Replace cost for say a 2,000 SF home locally is $140, or say $280,000 so you have $50,000 loss in value.

A remaining economic life chart may say the house is viable for 50 years. So 50,000 ÷ 280,000 = 18%± 50x18% = 9... the effective age is 9. If a good proxy for the subject then you can say the effective age of the subject is 9 ±.

 

[Texican1986]

Thank you!

IMO, the most similar sales available are, by definition, comparable sales. That said, I'm hesitant to compare renovated older homes to new homes due to the functional differences. Usually older homes - even when renovated - have smaller closets, 'closed' traffic flow, smaller bathrooms, galley kitchens, etc. to the point that - potentially - they would appeal to two different markets.

That said - and in today's environment where supply is so low - those preferencesThTh mT

 

[Texican1986]

Sometimes you may have to simply make a determined adjustment based on observation. But if you have any similar sales of older homes remodeled you can extract an "effective age" by subtracting the land and site improvements contribution from the sale price (of these comparables.) The remainder is the contributory value of the subject. That, in turn, means a current price as if new (replacement cost new - not reproduction cost). Example

Sale $300,000
Land & site value $70,000
Net to dwelling $230,000
Replace cost for say a 2,000 SF home locally is $140, or say $280,000 so you have $50,000 loss in value.

A remaining economic life chart may say the house is viable for 50 years. So 50,000 ÷ 280,000 = 18%± 50x18% = 9... the effective age is 9. If a good proxy for the subject then you can say the effective age of the subject is 9 ±.

Thank you for replying to my post. The example was very helpful.

 

[sputnam]

I never make adjustments just because the occupants in the house are older.

 

[Basically Rectangular]

You really should find at least one comparable with an age similar to the subject. Comparing sales built in 80's and 90's to a home built in 1904, even if renovated, is not really apples to apples.

 

[J Grant]

Adjustments are supposed to reflect market reactions ( what people pay for X ), not the mechanical or rote formula - in some areas older homes vintage style sell for more than newer ones so it really depends. An age adjustment might not be needed, if extensive replacement and remodeling lowered the effective comparable age to similar to the other sales.

 

[Tim The Enchanter]

Adjustments are supposed to reflect market reactions ( what people pay for X ), not the mechanical or rote formula - in some areas older homes vintage style sell for more than newer ones so it really depends. An age adjustment might not be needed, if extensive replacement and remodeling lowered the effective comparable age to similar to the other sales.

Sometimes vintage fully refurbished homes may be more desirable than a newish fancy cracker box of similar size. Does it have good "style"?

Or maybe it is just different types of buyers.

 

[ZZGAMAZZ]

Good morning everyone. I am a real estate agent from South Texas and I have a question. If you have a property that was built in 1904 but remodeled in 2005 and the only comps you can find are things built in the 80s in the 90s how do you adjust for the age? While the property was built in 1904 due to its remodeling and updating it is in better condition than most of the properties built in the 80s and 90s which is why I'm not sure exactly how to adjust for age or explain why there is no adjustment. I am trying to work on a broker price opinion for this property and this has me stumped.

The UAD Quality [of Construction] definitions address renovation to some extent...although if one brackets Construction Date, the comparable adjustments balance out regardless of the per-sqft factor. Age can be explained as "continually-evolving construction technology," because it seems that underwriting often questions that line item adjustment, which is indeed often incorporated into the "Condition" line item. (Just my personal opinions.)