Remaining Economic Life

[Michael Edwards]

Can anyone tell me if the Remaining Economic Life is required on an FHA appraisal? I was under the assumption that it is not required but an underwriter has requested it on an FHA appraisal that I completed. If it is not required where can I find documentation? Thanks.

 

[Mary Fee]

Michael-

The Cost Approach is not required on an FHA appraisal of a property over one year old. I'm not sure about the remaining economic life. I have always included a comment stating the remaining economic life within the cost approach section whether I have used the Cost Approach or not. My mentor always said you had to include it.

Good question. I would be interested to see other answers.

Mary

 

[Mountain Man]

I've always included it. Handbook 4150.2 section 3-4 give the definition and how to estimate it. Even thought the cost approach is not used, unless new to 1 year old, they still want to know that they are not making a 30 year loan on a house with only 20 years of life left.

 

[Michael Edwards]

Thanks. It is sometimes hard to find out what exactly FHA wants. I know that Fannie Mae no longer requires Remaining Economic Life on the appraisal, but that doesn't mean an underwriter want ask you for it. I guess I will always include it to be on the safe side.

 

[Rlong]

Yes I was told it was required also. Had to write a letter/revise report on a 2 yr old (1.5 yrs) FHA Condo... I laughed a bit. The underwriter actually called me direct. I think I sarcastically put down 60 years remaining on a total estimated life of 60 years, just to see if it would go through, maby it was 59.5...something like that.

Now I will remember to do it every time..(maybe)

 

[Mike Garrett RAA]

Both FHA and the VA require a remaining economic life be included in the appraisal report. This is almost always indicated on the first line of box opposite the cost approach on page two of the URAR. In fact it says....."Comments on Cost Approach) (such as blah blah blah, the estimated remaining economic life of the property) After which I put "REL = 40". It can be any number you can reasonably support; however, it should be no less than the term of the loan being considered.

What the lender wants to know is....do you, as the appraiser, believe the improvements will be economically feasible for the term. It is a guess on your part because few of us, if any, can anticipate that far into the future. Remember they are asking economic not physical life

 

[TEL2002]

I don't do FHA but here is my REL statement.

Assuming the repairs listed are completed and normal maintenance/ care the remaining economic life is estimated to be 30+ years.