Bill King is a licensed real estate broker and certified residential real estate appraiser in Washington State, and nationally recognized instructor of real estate and appraisal courses and seminars. Surrounding a hot dog with a mountain of peas and carrots will never turn it into a vegetable.īill King is Senior Vice President of Valuation Solutions at Platinum Data Solutions. It is critical to remember that the ratings are relative to the definitions, not to the other properties. For example, a six-year-old home that has had little maintenance resulting in the need to make repairs or replace components in order to make it competitive with typical six year old homes might warrant a C3 rating – and it would also warrant extensive commentary detailing the areas of deferred maintenance and the cost to bring it into marketable condition.Įach property needs to be categorized based on which rating definition most closely captures the state of the whole property at the time of appraisal for the subject, and at the date of sale for the comparable sales. While uncommon, it does happen and newer homes can warrant a C3 or even C4 condition rating. All properties require a minimum level of maintenance and upkeep a brand new home that is neglected can accrue depreciation at a faster than typical rate and fall into disrepair. A newer home could also justify a C3 rating if the wear and tear is accelerated. A complete renovation might even warrant a C2 rating, but the emphasis with C2 is on "complete". Older homes effectively re-gain a C3 rating through updating and renovation. We have kids and dogs so the carpet is definitely on its last leg, but otherwise we have replaced nothing, everything is serviceable and clean and the most appropriate rating is C2. My house is 14 years old and we have yet to replace anything except a fence panel. The key point in recognizing the line between C2 and C3 is that when the first round of replacement of short-lived components gets started (typically 15 years or so after construction), it probably has moved from a C2 to a C3 rating.
It also may reflect a property in which the majority of short-lived building components have been replaced but not to the level of a complete renovation.
Its estimated effective age is less than its actual age. Note: The improvement is in its first-cycle of replacing short-lived building components (appliances, floor coverings, HVAC, etc.) and is being well maintained. Some components, but not every major building component, may be updated or recently rehabilitated. If, for example, we say that a brand new home has a remaining economic life of 50, or 60 or even 70 years, we are not saying that the furnace, carpet and roof are all going to last 50, 60 or 70 years, nor are we saying that the foundation or truss system will last only 50 or 60 or 70 years.Ĭ3: The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. As we know, the overall economic life of a structure is a holistic view of a collection of component parts, each of which has its own economic life. This is based largely on the comment in Appendix D shown below, which refers to the "first-cycle of replacing short-lived building components (appliances, floor coverings, HVAC, etc.)". In my discussions with appraisers and lenders responsible for warranting appraisals to the GSEs, the overwhelming interpretation of when a property typically moves from "C2" into a "C3" rating is when its age reaches about 15 years.
In some cases it is the persistent belief that the definitions are relative, in others it seems to a belief that applying the C3 rating will require fewer comments, even if the home is nearly new. Much of the misunderstanding seems to be a carryover from the days when everything was "average". There continues to be a lot of misinterpretation of the UAD condition ratings resulting in inconsistent application of the ratings.