Definition of Actual Age
In real estate appraisal, the term Actual Age refers to the chronological age of a property or improvement, essentially reflecting the number of years that have elapsed since the property or structure was built. This is distinct from the Effective Age, which takes into account the overall condition, maintenance, and renovation efforts and might not necessarily align with the actual timeline.
Examples of Actual Age
- Residential Building: A house built in 2010 has an actual age of 13 years as of 2023.
- Commercial Building: A commercial building constructed in 2000 has an actual age of 23 years as of 2023.
- Mixed-Use Property: A property with both residential and commercial elements constructed in 1995 has an actual age of 28 years as of 2023.
Frequently Asked Questions (FAQs)
What is the difference between Actual Age and Effective Age?
Actual Age is the chronological age of the property from the time it was built, while Effective Age reflects the condition and usability of the property considering renovations, maintenance, and overall upkeep, which can either extend or reduce the perceived age.
How does Actual Age impact real estate valuation?
The Actual Age provides a baseline age of the property, but it is the Effective Age that more significantly impacts the property’s valuation. An older property that has been meticulously maintained can have a lower Effective Age and a higher market value.
Can the Actual Age of a property ever change?
No, the Actual Age of a property is fixed once it is constructed. It purely accounts for the number of years since the construction was completed.
Why is Effective Age sometimes more important than Actual Age?
Effective Age can offer a more accurate representation of a property’s current state and usability, which affects its market value and lifespan more directly than Actual Age does.
Who determines the Effective Age of a property?
A licensed appraiser typically determines the Effective Age by assessing the condition, renovations, maintenance history, and any wear and tear on the property.
Related Terms
- Effective Age: The age of the property based on its condition and market perception, factoring in maintenance and renovations.
- Chronological Age: Another term for Actual Age that strictly accounts for the passage of time since the property was built.
- Economic Life: The period during which an asset is expected to be productive and functional, generating income.
- Functional Obsolescence: A reduction in usefulness or value due to outdated design or features.
Online Resources
- Appraisal Institute
- American Society of Appraisers
- International Association of Certified Home Inspectors
References
- Appraisal Institute. (2013). The Appraisal of Real Estate. 14th Edition.
- American Society of Appraisers. (2011). Business Valuation Standards.
- International Valuation Standards Council. (2020). International Valuation Standards (IVS).
Suggested Books for Further Studies
- “The Appraisal of Real Estate” by Appraisal Institute
- “Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer
- “Investing in Real Estate” by Gary W. Eldred
- “Real Estate Valuation Theory” by Ko Wang and Marvin J. Wolverton
