Using property data to identify the answer to the question “What’s my house worth?”
Appraising the value of a home to determine what a house is worth depends on many factors, including an inquiry into the age of the structure.
Ascertaining the answer to that question will not necessarily be a simple math equation calculating the delta between the current year and the year a structure was built. Instead, to get an accurate valuation, the age of a home should be calculated using the effective age of a structure.
Effective age is defined as the estimate of a structure’s age based on its utility and physical wear and tear.
The actual year a home was built will never change. However, the effective year it was built can be older or newer than the construction date depending on maintenance, remodeling, structural alterations, removal of functional inadequacies, zoning changes, modernization of equipment, and other improvements to a structure.
While electrical and plumbing fixtures, carpet, vinyl, flooring materials, counter tops, and other interior decorating items may functionally last longer, their appearance and style may not. Replacing these items before they “wear out” will reduce the effective age of a house. After all, there’s a reason they say that upgrading kitchens and bathrooms are an investment in the value of your home.
What Does a Home’s Age Mean & How to Calculate Effective Age
Effective age is the age that reflects the true remaining life of a property, accounting for the typical life expectancy of such a building as well as its use. The effective age can be looked at as an estimate a structure’s lifespan not only based on the utility, but also the physical condition.
Determining the effective age of a structure is more of an art than a science and requires an expert to look at the state of materials, any appliance upgrades, the tastes of the market, and a structure’s use. Knowing this figure can be particularly important for appraisers who are searching for comparable structures to finalize a determination of value.
When selecting properties as comparables in an appraisal, appraisers should consider the effective age of each property to ensure the comparable homes are similar in effective age.
Let’s say there are two 100-year-old homes. One home is extensively remodeled with additions and the other home is in its original state, complete with a roll-rim kitchen sink and asbestos tile roofing shingles. To compare the two properties without making an adjustment for the difference in effective age would be an incorrect approach that could have significant impact on a home’s appraised value.
Property Data Powers Past, Current, and Future Valuations
CoreLogic maintains a Lifecycle Expectancy Guidelines chart for both residential and commercial properties that shows normal maintenance and upgrades timelines. Accurate effective age changes should not only account for building component upgrades but also for the effects of current local property use, maintenance, climate, neighborhood vitality, economics, zoning, and turnover associated with the property in question at the time of valuation.
Lifecycles can vary dramatically due to excessive functional or economic obsolescence as well as marketing or investor policies. Before establishing a proper life expectancy and effective age, an appraiser must carefully consider property type and usage in addition to the type of appraisal and value sought.
Whether you’re looking for the typical life of a structure or you’re seeking to evaluate its remaining useful life, having access to tools that can perform these calculations at scale is a must.
The market moves fast. Don’t let valuations slow you down. CoreLogic’s commercial and residential estimator solutions automatically calculate the amount of normal physical and functional depreciation using the schedule in the Marshall Valuation Service as well as our Commercial Cost Explorer and Residential Cost Handbook. These calculations are based on the occupancy, class, and quality in addition to effective age. With over 90 years of expertise, CoreLogic’s Marshall & Swift ® provides the property data that is the foundation of valuations.