Remaining economic life on an attached condo unit?

[Zavia]

The lender on an FHA loan is asking for remaining economic life on a townhouse. I've explained why remaining economic life is not viably determinable for attached dwellings (and thus is not included in the Fannie Mae condo form) but the loan won't close without a number.

My plan is to give them a number along with a comment that the lender requested the information and that it applies to the subject's unit only, not units attached to the subject or common areas.

Any thoughts? Thanks in advance.

 

[Jerry Bone Jr]

Marshall Swift Residential Cost Handbook, page E-7 does have "typical building lives" for attached SFR.

 

[incognito]

Why can't a fee simple attached townhouse have a determinable remaining economic life. How long will the improvements contribute at least $1 in value to the land. It is that simple. FHA REQUIRES IT. It has nothing to do with the FNMA condo form not having a place for it. The prior version of the 1004 did not have a place for REL, yet FHA and VA still required it. Being on the form is not the issue. The FNMA 1004 form states "(HUD and VA only)" by economic life, because VA and FHA had some input on the form designs, this time around.

(You are not doing a fee simple townhouse on the condo form, are you?)

If you were referring to a townhouse which a condominium, than you have to realize that you are appraising air, not a building. Your value includes an undivided interest (and sometimes exclusive interest) in common areas. Therefore it would not be a stretch to state that the subjects interest in the common areas (which includes the walls, floor, roof, etc of the WHOLE project) has a remaining economic life of xx years. Don't make too big of a deal over it, and end up loosing a client...

 

[Zavia]

Why can't a fee simple attached townhouse have a determinable remaining economic life. How long will the improvements contribute at least $1 in value to the land. It is that simple. FHA REQUIRES IT. It has nothing to do with the FNMA condo form not having a place for it. The prior version of the 1004 did not have a place for REL, yet FHA and VA still required it. Being on the form is not the issue. The FNMA 1004 form states "(HUD and VA only)" by economic life, because VA and FHA had some input on the form designs, this time around.

(You are not doing a fee simple townhouse on the condo form, are you?)

If you were referring to a townhouse which a condominium, than you have to realize that you are appraising air, not a building. Your value includes an undivided interest (and sometimes exclusive interest) in common areas. Therefore it would not be a stretch to state that the subjects interest in the common areas (which includes the walls, floor, roof, etc of the WHOLE project) has a remaining economic life of xx years. Don't make too big of a deal over it, and end up loosing a client...

Ingcognito, in this part of the country, "townhouses" refer to the style of attached buildings, not their property usage classification. And of course, as the subject is a condominium unit, not a unit in a PUD, which are sometimes also referred to as "townhouses", the correct form has been used.

And yes, although the value includes undivided interest in common areas, my inspection is within the four walls of the condo unit (one of which is a party wall) and therefore I cannot comment on the remaining economic life of the structure beyond those walls.

And yes of course forms do not dictate an appraiser's scope of work parameters; if a client wants additional information for which a form does not provide a field, that is no reason not to provide the information; my point was that remaining economic life was excluded from the condo form for a reason, and this is why.

I will provide a number and include the comment; I think that's the best way to go.

Thanks for your input.

 

[incognito]

Hey, it's your client, not mine. I think your decision is sound.

Simply stated, FHA requires it. Therefore, IT IS in your scope of work. I think you may have missed that point. If you accept an FHA assignment, you have agreed to THEIR scope of work, and that includes presenting a REL, on ALL properties... Mark 30 years+, and get on to your next job!

 

[Zavia]

Hey, it's your client, not mine. I think your decision is sound.

Simply stated, FHA requires it. Therefore, IT IS in your scope of work. I think you may have missed that point. If you accept an FHA assignment, you have agreed to THEIR scope of work, and that includes presenting a REL, on ALL properties... Mark 30 years+, and get on to your next job!

Right, I hadn't realized that FHA required it on attached condos as well, so now I know! Thanks again for your input.

 

[Mr Rex]

FHA requires the effective age for condos. REL is not part of the protocol for condos. See Appendix D.

Of course if I have established effective age as is required and I know the typical building life, its not too hard to do, and not the hill I'd fight my last battle on.

 

[RSW]

FHA requires the effective age for condos. REL is not part of the protocol for condos. See Appendix D.

Of course if I have established effective age as is required and I know the typical building life, its not too hard to do, and not the hill I'd fight my last battle on.

I see where you are comming from but I think you are to report the REL too.

 

[Mr Rex]

Not according to the revised Appendix D. It does say that the REL is to be reported on all appraisals in the 1004 section, but it does not require it in the condo section. The protocol that appliess to all FHA appraisals is before the 1004 section (pages D-1 thru D-13)

 

[RSW]

I know. But, the appendix D is a little confusing sometimes. I haven't done any condo's for HUD/FHA yet and I haven't had to deal with it. I think I would go ahead and give it to them anyways.