That's something that should be addressed when developing the scope of work with the lender and their underwriting guidelines.  FNMA and HUD do not require the cost approach for condos so there is no set rule or method to follow, or be used to provide that type of requested information by the underwriter.  There are ways, however, to determine it.

A condominium is a form of ownership interest of the "air space" of a unit, within a parcel of real estate, which can be conveyed and financed along with an interest in common elements.  When appraising a "Condo" you are not determining the value (or market value) of the "form of ownership" or the "air space", but the market value and/or marketability of the unit exposed to the open market.  Commonly by the sales comparison approach of similar units.  The condition and amenities of the unit, along with the common interests in comparison is the basis of the value.

By saying there is no "life" or "economic life" or the "remaining economic life is forever" would indicate that a condo unit in major deteriorated condition would be the same as or equal to a unit in excellent new condition.

If the condominium unit is destroyed by fire or other diaster, the owner has the right to rebuild in his or her "airspace".  Therefore, the replacement or reproduction cost along with depreciation would need to be, and should be, determined (separately of course) which would provide an estimate of remaining economic life.  That period would also require consideration of the present condition and other known factors that might affect future use or desirability.  

The condominium form does not allow for the cost approach, which on other forms (if developed) requires determination or estimate of the remaining economic life, which is the remaining period over which a property is expected to be economically usable, with normal repairs and maintenance, for its intended purpose and which it can be expected to remain useful.  It does however require the effective age in the project information section which is another way that can be used to determine or estimate the remaining life and subsequently remaining economical life.   

If the condo unit is income producing (rental), the remaining economical life can be determined or estimated by using the income capitalization approach and/or form 216 (operating income statement) replacement reserve schedule (which provides an estimate of replacement cost and remaining economic life or useful life using the straight-line recapture method for capital improvements) and the use of itemized accrued depreciation or segregated cost depreciation for other capital and non-capital improvements. 

It is rare that an underwriter would make such a request, but I don't see any reason not to determine the remaining economical life, by using part of, or a combination of sources and/or methods as part of the work file (along with additional comps, market facts, etc) to have available if requested.       

Sara  -  I have never been asked by an underwriter to provide REL when the appraisal was for a purchase or refi on a condominium property that was, or was to be, owner occupied.  I have and do however, provide the REL when the property is a rental as part of my income approach analysis.  Since I am somewhat consistant in my appraisal methods, I automatically develop the REL for non-rental condominium properties the same as I do for the rentals, I just don't include it in the report.  When developing the scope of work, I don't directly ask if the REL is required as part of the underwritting guidelines, most LOs and UWs wouldn't even know what I'm talking about.  If the property is a rental, I will address the development in the SOW based on the information I get on the use of the property.

Jennifer  - Perhaps this may make it a little more clear. 

The most common way to determine remaining economical life is by the cost approach.  The condominium form (FNMA1073) does not include the cost approach, therefore no determination of REL.  Obviously it is no concern to FNMA, therefore no concern to FHA either since both require the use of that form for condos. 

It may, however, be a concern to an investor, who may want to know since the unit is income producing.  Now the easiest and quickest way to determine REL without using the cost approach would be to assume (extraordinary assumption) the life of the condo project to be 70 years (which about all you will get from FHA about REL on approved condominium projects). 

So assuming the life is 70 years, you would subtract the effective age (which is included on the condo form) from 70 to determine the remaining life, and use the remaining life figure as the remaining economical life of the unit.  Simple, but does not provide much credibility to the result.  It may be sufficient to satisfy an underwriter, but not many savy investors.  At least not enough to get an investor's repeat business or referral business on condo investments.

So not being a "skippy", I use the income capitalization approach, operating income statement, and itemized accrued depreciation (as with most any other investment property), and if building blue prints are available segregated cost depreciation (it helps to have a CPA background or at least tax accounting for that), so the REL can be determined or estimated by using a method that provides more credibility.

Sara  -  Yes it does.  But that is how some would do it.  The old "Wham, Bam, Pay me Man - Next" mentallity.  Any other way (accurate or not) would entail more work than most are willing to do. 

That's good to know WHERE they want it, BUT, how did you calculate or determine it?

Sara - This is my year end conclusion :)

Christopher Parra said - "FHA knows there is no actual way to get a remaining economic life since the condominium could last forever using the HOA fees to keep the building(s) at a constant level maintenance, appeal, etc."

To me FHA is referring to physical life, not economic life defined as - The period of time during which a given building or other improvement to property is expected to contribute (positively) to the value of the total property. This period is typically shorter than the period during which the improvement could be left on the property, that is, its physical life.  The period of time over which property may generate economic benefits.

And remaining economic life being defined as - The number of years remaining in the economic life of a building or other improvement as of the date of the appraisal. This period is influenced by the attitudes of market participants and by market reactions to competitive properties on the market.  The estimated period of time until the improvements lose their ability to serve their intended purpose.

FHA/HUD state, to estimate the remaining economic life means the appraiser must consider the relationship between the property and the economic stability of the block, neighborhood, and community, and the need or demand for a home of that particular type.  The relationship between the property and the immediate environment and the trends and rate of change of characteristics of the neighborhood and their effect on land values.  Also the architectural design, style and utility from a functional point of view and the likelihood of obsolescence attributable to new inventions, new materials and changes in the tastes of buyers.

As I stated before, the best way to estimate REL is with the cost approach and although it is no longer required, with all of the other changes going on (mtg qualifications, underwriting guidelines, etc) I can foresee the cost approach being required again in the near future.  If FHA can only state "Do your best", without clearly knowing the difference between (remaining) economic life and (remaining) physical life, but still dictates how to estimate REL, leaves the result to be reported as any figure the appraiser wishes to plug in that looks good - most likely being between 30 and 40 years.