What is meant by 'effective age' in real estate?

Effective age in real estate refers to the observed condition and utility age of a structure. It is an estimate that reflects how well a property has been maintained and can serve to assess its current market value. Unlike chronological age, which simply counts the years since construction, effective age takes into consideration the actual physical condition, renovations, and upgrades that might have occurred, as well as how the property still meets current standards and needs.

This concept is crucial for appraisers and evaluators as it influences the valuation process. By understanding a property's effective age, one can better appraise its worth based on how well it performs in today's real estate market, regardless of its actual age. This idea helps convey that a property may be older in years but newer in function and appeal, impacting its marketability and value.