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REL

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Is that right?
Yes
Say it is 30 years old with 30 years typical REL. But it has "issues" (C5) . In the modified age life method, you will be taking into account those defects, which will shorten the REL, so say you estimate the necessary repairs (here, now) and deduct accordingly. In that case, the future repairs are not an issue. Yes, to continue to have remaining life, it will need upgrades, but that doesn't change the total life. Total life should relate to quality. The Effective Age is what varies. And thus, the remaining life varies. But future events are not applicable to current value.
 

mike32716

Member
Joined
Jan 23, 2003
Professional Status
Certified Residential Appraiser
State
Florida
The conversation here concerning REL is correct. However, the OP indicated a townhouse. The question should be is that townhouse subject to strict community covenants (like a condo would)? If so, then the HABU also requires analysis of the legal question concerning whether that townhouse could be torn down, the HOA dissolved, and the property sold off, or maybe everyone agrees to build a new project. In most states it is very difficult to change the current use of a condo or townhouse. It requires a significant majority of the HOA members. It usually happens after the project becomes derelict, and investors grab up a bunch of them. Enough to swing an HOA vote to liquidate. I've seen quite a few old waterfront projects that are sitting on land worth five or six times the value of the residential unit, but the owners won't budge, and until they do the HABU given the legal constraints is as is.

In most cases, the REL of a condo or townhouse will continue to be pushed out as homeowners/associations are required to maintain and renovate community property until, as mentioned above, everything collapses, and they can't.
 

Zephyr999

Sophomore Member
Joined
Oct 23, 2015
Professional Status
Certified General Appraiser
State
Wisconsin
Interesting...no discussion of short lived, which a roof is. Separate lives for long versus short...one suggests replacement routinely while the other does not. Maybe I missed this in the thread...speed reading could've.
 

Bert Craytor

Senior Member
Gold Supporting Member
Joined
Jun 27, 2017
Professional Status
Certified General Appraiser
State
California

Some have hinted at the solution. None have really stated what it is. A house has to be maintained in satisfactory condition. If the buyer wants to get an FHA loan, then the house must be brought up to certain standards before it can qualify for the loan. Another kind of loan might be more flexible. We don't know much about the requirements of this appraisal, other than it is for an REO. But generally, you would determine deficiencies that must be corrected before the sale and/or repaired as part of the loan requirements after the sale (e.g. rehab mortgage). The estimated cost of repairs then becomes part of the equation.

Assuming deficiencies are repaired to professional standards, then you can estimate the REL, based on the assumption that the house is continually maintained in satisfactory condition: Roof repaired as needed, shingles replaced every 20-30 years, house painted and caulked every 10 years or more frequently if needed, dry rot removed, fumigation when necessary and so on.

Well maintained homes, even if rather cheaply constructed, (within limits) can last for many decades. The interesting thing though is to kind of estimate how long before no-one would really want to live in the home regardless of condition. Does it qualify to ever become a "historic property"? If it is just a cookie-cutter 800sf, 1950 home, not likely.

This is why appraisers need a couple of courses in logic. Not everything is or can be spelled out explicitly in regulations. You have to apply logic and make deductions. Also, the regs are not flawless and are often contradictory. You need to be able to see the contradictions and make a reasonable decision about how to handle them. And if an idiot reviewer thinks otherwise, then you are in hot water for no fault of your own.
 
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