Remaining economic life for a condo unit?

[Mike Kennedy]

suggest 3-4 applies to all residential properties

see 4150.2 http://www.georgiaappraiser.com/HUD/

3-4 4 R[URL="http://www.georgiaappraiser.com/HUD/75188.htm"]3-4A Economic Life vs. Physical Lifehttp://www.georgiaappraiser.com/HUD/toc_topic.gif3-4B Estimation of Remaining Economic Lifehttp://www.georgiaappraiser.com/HUD/toc_topic.gif3-4C End of Useful Life of Building Improvementsemaining Economic Life of Building Improvements[/URL]

9–1B Approach to Value
The approach to value for a single unit in a condominium project is similar to that for other home mortgage programs. As in other home mortgage appraisals, value indications from the Sales Comparison and Income Capitalization Approaches are developed and considered (see Chapter 4 of this Handbook). The cost approach can not be performed for a condominium unit.

 

[Don Fiore]

see 4150.2 http://www.georgiaappraiser.com/HUD/

http://www.georgiaappraiser.com/HUD/toc_closedbook.gif3-4 Remaining Economic Life of Building Improvements

9–1B Approach to Value
The approach to value for a single unit in a condominium project is similar to that for other home mortgage programs. As in other home mortgage appraisals, value indications from the Sales Comparison and Income Capitalization Approaches are developed and considered (see Chapter 4 of this Handbook). The cost approach can not be performed for a condominium unit.

Thanks. But I'm already aware of this as shown in my last post. Some here (see 1st reply to this thread) state that HUD has always required a REL estimate for condos. Apparently, the underwriter I'm dealing with also believes this. I'm saying this is not correct. I'm looking for something that explicitly and specifically demonstrates that I am wrong and they are right.

I'm not being sarcastic or looking for a fight or debate. If I've somehow been glossing over a HUD requirement all these years, I really would appreciate knowing the specific requirement I've been failing to satisfy.

 

[Don Fiore]

Please allow me to elaborate slightly. If you scroll up a bit, you'll see that I already noted that all HUD REL references I've ever seen, including the ones you've cited, explicitly relate to the "building". A "building", as i tend to define it, is generally an independent, free-standing structure. I can see where this can bend a bit in regard to townhouse-style properties, but not with a condo unit in a multi-unit structure.

This would be closer to attempting an REL estimate for one, single room in a house. Which would be sort of ridiculous IMO.

So let me rephrase - has anyone here provided a REL estimate for a condo unit (not a townhouse held in condo ownership, but a typical condominium unit in a mid-rise building?
And if so, how did you take the rest of the structure into account?

 

[Mike Garrett RAA]

Just do it. It is an estimate on the part of the appraiser. IN MY MARKET, it is reasonable to assume most condos would have a remaining economic life of at least 30 years which would cover the term of the loan and satisfy the lender.

As a side note, what is the remaining economic life of a single family residential property in light of the present economy? That should promote some interesting commentary.

 

[Cigar]

As a side note, what is the remaining economic life of a single family residential property in light of the present economy? That should promote some interesting commentary.

Wasn't it Terrel who told us that entire tract of new vacant homes in Arkansas was being bulldozed? Wat's the REL of some of these new energy efficient "Toxic Boxes" clad in plastic wrap and styrofoam, nobody knows yet, I've seen expensive new homes sheathed with Flakeboard covered in plastic wrap rot out in less than 10 years, when calculating REL do you factor in anticipated repairs because of poor construction techniques? I dropped out of the NAHB in the mid 70s when they stared advocating disposable homes on the basis that we should take a page from the car manufacturers' book and create repeat business by building disposable homes, energy efficiency wiht non-breathable homes has made their long awaited dream come true.

If anyone is interested on an in-depth discussion read this thread I started on the building inspectors' forum, Joe Lstiburek is arguably the leading building scientist in the United States.

 

[Don Fiore]

Update: FYI

Underwriter just withdrew request for REL on condo unit. She acknowledged that this is HUD requirement for SFRs and 2-4 units only and not condo units. I explained that estimated REL for a condo unit was askin to attempting to estimate REL for only one room in an entire house. She agreed, admitted the confusion, and accepted the report as I wrote it.

Thanks to all here who offered advice...or at least those here who knew what they were talking about.

 

[RDmgmt]

Although I don't deal with the underwriting folks you do, I would think that any discussion on the remaining economic life of a condominium unit would be inherently linked to the condo fee, managment, and reserve accounts established. If a condo has good managment and already budgeted and collected through fees for a new roof in two years, new windows in three years, etc. then as a unit owner, you have already paid for these capital expenditures to be done in the future and the REL could be indefinate, at the same time, I have seen many proejcts that are do not even make it to 30 years before they are torn down.

Without study of the operating and reserve account balances, I don't how you can estimate economic life based on the current condition of the improvements.

 

[Joyce Potts]

Although I don't deal with the underwriting folks you do, I would think that any discussion on the remaining economic life of a condominium unit would be inherently linked to the condo fee, managment, and reserve accounts established. If a condo has good managment and already budgeted and collected through fees for a new roof in two years, new windows in three years, etc. then as a unit owner, you have already paid for these capital expenditures to be done in the future and the REL could be indefinate, at the same time, I have seen many proejcts that are do not even make it to 30 years before they are torn down.

Without study of the operating and reserve account balances, I don't how you can estimate economic life based on the current condition of the improvements.

Excellent response!

 

[DTB]

Although I don't deal with the underwriting folks you do, I would think that any discussion on the remaining economic life of a condominium unit would be inherently linked to the condo fee, managment, and reserve accounts established. If a condo has good managment and already budgeted and collected through fees for a new roof in two years, new windows in three years, etc. then as a unit owner, you have already paid for these capital expenditures to be done in the future and the REL could be indefinate, at the same time, I have seen many proejcts that are do not even make it to 30 years before they are torn down.

Without study of the operating and reserve account balances, I don't how you can estimate economic life based on the current condition of the improvements.

Not neccesarily because of condition.

 

[RDmgmt]

But, yes some because of condition, build it cheap, and then rent to a certain type of clientele that may have a propensity for certain illegal and addictive substances, and property condition tends to fail rapidily!