Definition

Remaining economic life is the estimated period of time until the improvements lose their ability to serve their intended purpose as a home.

Basic Requirements

For VA Loan Guaranty purposes, the remaining economic life of the security must be at least as long as the loan repayment term.

A short remaining economic life estimate must be supportable and not arbitrarily established.  This is to avoid depriving veterans of the home of their choice in an area where they can afford to live.

What the Appraiser Must Consider

In estimating remaining economic life, the appraiser must consider

·   the relationship between the property and the economic stability of the block, neighborhood, and community

·   comparisons with homes in the same or similar areas

·   the need for a home of the particular type being appraised

·   the architectural design, style, and utility from a functional point of view

·   the workmanship and durability of the construction, its physical condition and probable cost of maintenance and/or repair

·   the extent to which other homes in the area are kept in repair, and

·   in areas where rehabilitation and code enforcement are operating or under consideration, their expected results in improving the neighborhood for residential use.

What the Appraiser Must Report

If the estimate of remaining economic life is less than 30 years, the appraiser must provide a supporting explanation, based on either known economic factors or observed physical condition.

If the estimate of remaining economic life is 30 years or more, the appraiser must state the estimate at its maximum (for example, 40 years).

For condominium units, the estimate of remaining economic life must be reported in the “Comments” section of Fannie Mae Form 1073, Individual Condominium Unit Appraisal Report.