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REL

Salty

Thread Starter
Junior Member
Joined
Mar 12, 2010
Professional Status
Certified Residential Appraiser
State
Pennsylvania
I'm having a brain ****. When estimating REL do we assume going froward the property will be reasonably maintained or is is it based on if no other maintenance was performed going forward?

I'm appraising a 30-year-old town home vacant REO. No major issues, just has no floor covering (exposed plywood) and needs new kitchen cabinets.
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
What are the competing properties doing? I have pre civil war properties in my coverage area that Sherman's blazing march missed (1870s) They probably have 100+ years remaining economic life if maintained. REL may be more related to changes in the market than actual age. MHO.
 

Salty

Thread Starter
Junior Member
Joined
Mar 12, 2010
Professional Status
Certified Residential Appraiser
State
Pennsylvania
This is an area of endless mid 1980's town home developments. Not sturdy old-school construction. If there is reasonable maintenance moving forward REL could be indefinite. If no maintenance and it remains vacant the roof will start to leak in 5 years, mold will take hold, drywall ceilings will eventually start to fall, etc... For the life of me I can't find concrete support for REL.

In fact, I have not one single comparable sale in terms of condition looking back 5-years. No problem I have a good adjustment. I'm just hung up on REL. I feel like after 15 - 20 years with no maintenance at all this thing would no continue to add value to the site, which is in the middle of a row of homes. should just be torn down to studs and rebuilt. Of course I have no market support for this. This might be the first REL I really cant find any market support for.
 

Salty

Thread Starter
Junior Member
Joined
Mar 12, 2010
Professional Status
Certified Residential Appraiser
State
Pennsylvania
I guess my question is simply does REL assume typical maintenance moving forward? If so, does that change with a vacant property?
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
Take a look at M&S depreciation charts. Unless the trend is to tear down very soon, unless you have a crystal ball you might want to rely on history rather than projections.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
This is an area of endless mid 1980's town home developments. Not sturdy old-school construction. If there is reasonable maintenance moving forward REL could be indefinite. If no maintenance and it remains vacant the roof will start to leak in 5 years, mold will take hold, drywall ceilings will eventually start to fall, etc... For the life of me I can't find concrete support for REL.

In fact, I have not one single comparable sale in terms of condition looking back 5-years. No problem I have a good adjustment. I'm just hung up on REL. I feel like after 15 - 20 years with no maintenance at all this thing would no continue to add value to the site, which is in the middle of a row of homes. should just be torn down to studs and rebuilt. Of course I have no market support for this. This might be the first REL I really cant find any market support for.
we can not predict future maintenance extremes, such as no machinate or remodeling, re, we would estimate REL on the condition at date of inspection,,,for working assumption assume avg physical maintenance ,but REL also depends on obsolescence/ how market sees the property. I've seen in my area well maintained houses built 20-30 years ago, that are candidates for tear down/build new due to o high land values when near beach or hot urban location- a few miles away same house would be used for decades as regular family style housing,
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
I guess my question is simply does REL assume typical maintenance moving forward? If so, does that change with a vacant property?
Yes. Google "Waste" as it relates to Real Estate..
 

andrew81

Senior Member
Gold Supporting Member
Joined
Dec 5, 2008
Professional Status
Certified Residential Appraiser
State
Illinois
it is based on the typical maintenance of similar comparable sold properties.

if it is likely the use would change, then, it is based on the current condition without maintenance.

given that you said it is a row home, eventually (once the price is right) someone would buy it and renovate it, as there are (likely) no other competing uses.

i would estimate the rel based on major components being updated as needed.
 
Last edited:

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
REL should relate to the amount of life left regardless of condition. It does not assume the dwelling is updated periodically. A 300 year old house that is updated will always remaining life unless it truly reaches the end of its days. Simple age life would take the replacement divided by the total life, multiple times its effective age and calculate accordingly. Modified age-life relates to making adjustments for curable obsolescences. Those basically are subtracted from the remaining life.

A house that is 10 years old with normal wear and tear and a 50 year TEL has 40 years REL.
A house that is 10 years old and repairs amount to an additional 10 years of the RCN, (20% of 50 year life) would have a EA of 20 and 30 years REL. If only some minor repair would only subtract a year or two. If some externality exists (say the street is rapidly becoming commercial) then analysis of land values will suggest a rapidly reduction in the contributory value of the buildings and increase in land value. And you are only concerned with the improvements. So once the land value equals the value of the whole property as residential, then the REL is zero, even if the house is in relatively good condition and has remaining physical life.
 

andrew81

Senior Member
Gold Supporting Member
Joined
Dec 5, 2008
Professional Status
Certified Residential Appraiser
State
Illinois
the market dictates if it will continue its current use and will be maintained.
the market dictates if it is financially feasible to purchase a property and renovate
the market dictates if it is financially feasible to purchase a property and build new
the market dictates the depreciation

what is the contributory value of the current improvement and what is the highest and best use?

do buyers use similar properties without renovation
do buyers renovate and rent
do buyers renovate and flip
do buyers raze and build new
is the neighborhood in transition

compared to similar properties is it likely to be maintained or will it be left to rot?
what is the minimal expectancy of an owner of a similar property?
will cost to purchase plus renovations exceed the cost of the underlying land?
what is the highest and best use?

this is a row home, what is the likely use? i dont know, only you can answer this by reading your market

based on the properties highest and best use what will the likely buyer do?
 
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