Remaining Economic Life

[glenn walker]

I assume there are a lot of tear downs though, right? I mean they do build new houses in LA I presume. Teardowns to me are vacant land sales and I've rarely found the teardown to sell significantly more or less than a bare lot.

No very few tear downs, in areas I work most contractors, or investors will purchase the entire home, then tear only a portion down, and pull permits as a remodel. its really a new home when finished but normally they keep the same architecture so it conforms with the neighborhood. This is because in order to get a vacant lot the entitlements alone can be $150,0000 or more, and to build new, can take two or more years jumping through the City-County Bureaucracy and environmental issues. So almost everything is a remodel, you drive by and one or two walls is standing, then 6 months later you drive bye and its a rebuilt Craftsman or Spanish style, and unless you got out or inside you would never know its basically a new home. On the tax records it will even still how its age as 1935 etc. In the hoods you will find a few vacant lots but they were incurred by fires and no sales, often they just sit there empty with weeds and beer bottles thrown on them.

 

[Terrel L. Shields]

vacant lot the entitlements alone can be $150,0000

what a nightmare.

 

[glenn walker]

what a nightmare.

Often $200,000 - And you wonder why-so many are leaving LMAO

 

[MMing5000]

I received good responses from everyone the last time I posted on here, so I'm here to do it again.

I am currently working on a report for a property in an area that is undergoing a $14 million dollar renovation. The property in question was recently semi-renovated after not seeing any documented renovations in 40 years. My remaining economic life I came up with was 25 years. None of these improvement were completed prior to going under contract. The house would have been better off being torn down, and a new house built. The site value is 80% of the sales comparison approach value. Based on the information I'm providing, do you think I am wrong to have come in at such a low REL? After reading numerous posts, I've seen plenty of people say to just call it 30+ years and be done with it. Others have said if an appraiser comes in at 25 years of REL, they should be castrated and burned at the stake while their whole family watches. Lets keep it civil here, and not be keyboard warriors. My explanation is as follows:

Due to the age and difficulty of determining accrued depreciation, in older homes such as the subject, estimating remaining economic life can be difficult. The subject property was on the market for 631 days prior to coming under contract, and receiving numerous updates. The subject property had no recorded or permitted updates from the time built in 1960, until 1998. The permits that were able to be seen have been attached to this appraisal. Information used for this report has been based off information from the 4 point inspection in this appraisal. A/C is new, and can expect to last ~15 years; Roofing is expected to last ~15 years for shingle, and ~10 years for flat roof; Some plumbing has been updated, but a permit was not pulled, and estimating remaining economic life based off of 3 different types of plumbing with limited access is not accurate. Copper pipes last up to ~80 years, PVC ~25-40 years, and PEX ~40-50 years. The electrical wiring has been replaced in the breaker box to cloth wiring, and the remaining life of the electrical box is ~30 years. Some windows have not been replaced, and are at the end of their economic life. The windows that have been replaced, were done without a permit, and their replacement date is unknown, making it hard to estimate remaining economic life. The replaced windows appear to be impact windows which are expected to last ~40 years if properly installed. The pool does not show any permitted resurfacing, and concrete pools are generally supposed to be resurfaced every ~10 years. The subject's foundation and exterior walls have an expected life of ~80-100 years. No defects were noted in the inspection regarding foundation. Based on the limited information available, the appraisers opinion of remaining economic life is 25 years.

What I am seeing is improvements that have a maximum life span of 20-30 years, and a market that is going through gentrification. There are no 100 year old homes in the area, and the oldest homes are going to be built in the 50's. The house across the street is a 2 story mansion built within the past 20 years, and homes in the area are either staying updated, or being torn down. This home has no interior updates to kitchen, baths, flooring, etc. The lender is really up my arse to explain why the REL isn't 30 years. I thought this information would suffice, but I was wrong. And yes, this is for an AMC. And no, I am not a trainee. I just don't know how to get updated lol

Providing us with a few photos would help us provide a more meaningful response - otherwise, our feedbacks and opinions are all based on our own ideas of what the property is actually like.