On a housing appraisal what is the difference between effective age and economic life?
We got back the appraisal on our house. It was built in 1950 so is 59 years ancient. On the section "COST APPROACH TO VALUE" it reads the below:
"Physical depreciation calculated utilizing the economic age-life method. Land
to value ratio is typical for the area. Remaining Economic Life: The difference
between the effective age and the economic life basis estimate. Due to
updating/maintenance effective age has been sufficiently reduced.
Estimated Remaining Economic Life (HUD and VA only) Years"
I know that the economic life means the amount of time remaining that the house is expected to serve its purpose. What does the effective age refer to? Is this whole commot above a excellent or a terrible thing to come up on an appraisal? Thanks for your help!
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Really the comment is a excellent one. The "economic life estimate" is how long the appraiser believes a property like yours would typically last. The "effective age" is how ancient the property "appears to be" compared to other properties.
In this case the appraiser is saying that because of updating and excellent maintenance, the property appears to be younger than it is. Therefore the remaining life is longer than other properties built about the same time, and the property is worth more than properties built about the same time.