Appraiser Valuation of Real Estate by D.F. McGarry

8/14/2019 Appraiser Valuation of Real Estate by D.F. McGarry

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The Rea,ltuBltueBook ol CaLilonLia

D. F. I{C(IAERYtl0rrrcr l>resid.trt rultu tunrrlLos An|el.s


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172 TIL1 le(Ltlt Blue Boak of Cal:ifonriu

Ap praisal- aluationof Real EstatcB?/ D, F. MoGARRY

. Ma.tlrct Vullte-Lot:tLt,iol, Utitit]|, Si.e, Shupe Resitlen-l.iol- Blt s tes P ruw t.jt D erft ( i.tt an-Ob N )tesenL .

f T , \ o u l d l , e r , t . s r , r ' r p , r , o J . , nn d c : r o , o l L / l r ) o \ p r . r r r a b j 4 , lI u f A t t f j t i " r l . i r , ' e L r e f 2 , r i , p , a r d n u " f f o d ! v ' ) l b c m a d e o J o " u . C e r t . i n I u , L l - r ' a J p | i r ' . : p l F sM i l l r i l . d i . ap d , i n r hphop that some advanlage nray acclue to lhe readel..The term "Applaisal," as used jr thjs djscussion, means thedeter.minatiorl of "Mall(et Vaiue.""MaRKET VALUE" js held by courts of larv to be,,that pl,ice ex-pressed r1 erms of rroDeJ f(rl which a property 11.ould ell in the openmatket, the sellcl no1 beiDg obligcd to sell and the buyr not beingobliged o buy;the sale o be madc,subject o condit iorsusu.r l D th;conrnunity, and with a Ieasonable ime gileD to eflccl such sale.,,It is evidcnt, thereforc, that ^n AL)1tr1ist,lDvohes studt., exDe-derlcc and iudgment, rvhereas n an actual S(l il oft-timcs haDpcnsthat Foltune or Fancy is the guiding gcnius. To exptessan opiDionabout anolher pelson should never be co|sidefed a tlivial rratter..One's eputatioD is aD individnal asset.Sinrilarly, one's propelty is his material asset, nnd a cur-sory or.casualoDinion as to its va]ue, may prove unfair and un\vise. yei it isnot uncommorl for glatuitous valuations to be given by those whodo not apl leciate the possiblc | just ice invohed.Tax valualions, in their \,er'y natlrre, ale comparatile, andprcpct ly should be c onselvat ive.Loan v.rluations geDelalll- ale color.ed \jth a modicunl of deDr,esBion, f not pessirnism.Plomol.ion vaiuations, howcvcr, rsuallt beam with the I esptcn,denceof plospect and optimjsm.Dach of these ralcln rellecls the corlect nrar.kelvalue.The four ca}dirlal faciols irl all valuatio|s arq: Loftlt;ul, Llti.lit,lJ,Si,'e and Sr.r.r,.Loc^'rloN-Whele a propeltl. is located is.q,or'thy ol ntjnlost con-sidcratior. The Ar.(tic regions h:1!e their lure for' explorers, thcSahara Deselt is as il. is, and Caljlolnia has what it has,-a byle?rsonof l,oGtiorl. As ir1geoglaphy, e\e mot'c so iD realty valua-Co irg from afar, one observes he rast expa)lseof more or less:rrid aleas, virtually rvorthless, save for.(attle )ange; then conres he"big farn" couDtry, $'ith its trading posts; then- 1e.,snall farm,'counlr ' l 'wit l l i ts hamlcts nd vi l lages; hen the intensivety Lrlt ivated


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The Re( t! Btue Rook of Co,kfornill t73''little farm" districts nearer centers of population; then the sparselysettledsubdivisions; then the "newer" homes;then the "older" homes;then the outlying "small store" districts,-and finally $re arrive at the"business section" of the industdal or commercial metropolis.It will have been obseNed that land values along the main high-ways have been higher than those more lemot.Accessibility is the explanation.Ingress to, and egress from, any given location determine howand for what puryose any property is available.

UTiLrry Th use to which a ploperty is, or can be put, is ameasur-e f value. ID country plope*y, the nature and quality andnet revenue of crops are to be considered. These depend upon soil,water and climate. Oldinarily, good land without water is a poten-tislitv.Ilany crops require cer'taiDmean daily and nightly temperaturesduling the growing seasons. In Califomia, climatic conditions afiorda v.rst valiety of fafm and orchard product, but the-sedifTer ir1 kirdand quality by reason of soii, watel conditions and freedom from orsubjectionto extrcmes of atmospheric condition.ID city plopedy, bloadly speakirlg, the maiu uses ale Residence.Businessand Industrial.RESIDDNCE.-The$-or.thof proper'ly for home pur'Ioseshas manyphases. The working man requires hone sites conveniert to transpor--tation facility, which \1.i11'eadily convey hin] to and f)'om his work.Time with him is of moment. Also, advartage accrues f his cost oflivjng may be iessenedby home soil pr-oduction. Nea less to schooland markt is not to be overlooked.The more ivealthy man, howevel, measuresvalues from othel con-siderat;ons, such as building testrictions, street inlplovements, en-vironment, scenic view, and the like. High class residencedist ctsinclude all these and mor'e.SuBDlvlsloNs.-Moneys expendedon subdivision property shouldffectneeded advantage in utility of production, othelwise the addedcapital may not add colresponding increment to the market value.This utility and production ar-ekeenly subject to the law of supply

and demand. Many times we ffnd miles of subulban acreagedespoiledof its use as such, and prenatulely tlansfonned irto "town lots,"without any local demaDd fol ar increase in the supply of this classof prcperty. The resultant condition is eithel that these excrescencesre-main or years as mute t bute to the malpractice of the promoter,or are Dassedon to his successor n interest, whose main excuse or-being itle osner can b charged to irlexperierce or' an over-eDthusias-tic imagination.BUSINESS RopERTy-The rental production of plopelty and itsprospeclshave nruch to do with values.In most cities the center of the businesssection s usually the peakpojnt of land values. This is due to the fact that such proDedy canb made to produce the greatest reveDue on any given unit of areawith the least pelsonal relationship on the palt of the owner.Congestionof traffic creates greatel denand, and makes for thehishest useot larid. The most valuable land is that most svailable to


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r74 The ned,ItABIue Book of Cakforninthe-greatest umberof people.As privateownership, owever, imitsindividual control. and as the lrend of confines imits nalure of use,it is evident hat Szze nd^Slropef lots alsoafect valuesat any givenlocation. Further, all linesof business re not of equalmonetarypro-duction; the.natureof the businesswhich canutiliie any plot oi landis a determining actor. Retail business s generally he most pro-ductive,and usuallydemandsandhaving themost accessibleocation.From this high point valuesdecrease long hemain a*eries of travelof the purchasingpublic. Paralleland intersectingaderies reflect, na measurp,he values f thp mainar.tel. ies.Width of streets,nature of traffic, transportationsemice,and allsuch. have their influence.Retail business s like a stream; it flo\Ms long the line of leastresistance, nd lvhen t encounters n obstacle,s diverted,and againfollows a simila.r course. There is this difference,however.-thestream flows t'o?, its source the retail business lows toflrards ts

DEpREcrATroNOBsoLEscENcE-Thesewo elenents are fre-quently underestimated,and, by the ordinary investor, oft-timesignored. The tru test of a good and investmentshouldbe over aterm of ten or twenty yeaN, at least.If the net incomeof rmprovedbusiDess roperty will not pay afair rate of intereston the investmentover andabovea sinkins fundro writaofrdepraciarionn i hp mprovements,r i f thpprospectlven-creasen the land valuewill not care or the deficit. hen srat cautionshould be cxercisedas lo the amount to be added for

-lheso-ealledimprovements. The combiningof capital asconstruction, nd capitalas land into enduringand efficientrevenueproduction, s muchmoredifficult than many appr.eciate. How often do we find the syrEnetryand beauty ol adjoinitg proper-tymsrred by the injudicious locationof apartmenl housesand sl,orebuildings,when such nvestmentsdonot.and cannot, a'orephysi(aldeprc.iariol, rrackshem,producesufi i . icni ncompo havpwananled heir construci ion.Someovners seemo concludehat if they control he only vacantlot in a block, mprovedwith residences,t is a magnificentoppor-tunity to erect an apartment houseor store building, without coniid-

ering the needof the ocality for either an apartmenthouse r a store-What i-s he result'? They not only add to tlieir oi,.n burdens, but alsodamagetheir neighbols. By reasonof aalvancesmadein architectureand in structural methods-by reason of increa.sins demanalsof thepublic for modern convenicncesnd ul)- lo-date quipmelt-m*ntbuildings become obsoletemuch more rapidly than their ph',sicaldepreciationwould warrant.Also. misplaced r misfit buildingsmay lack efficient utility andbecomemoreor lessobsolete pon heir complelioD.Obsolescencen utility is alsocaused y changeof Iocalconalitionsas to tmffic and business, In some instances a quondarn welljmprovedproperry is seriously mpair.edas to ijs usesby the migr&tion of !he_ usiness enter. Neighboring property owners mat bederlnng alr revenue n the originalcosiof their 'holding6,ndmaybead!rae to keeping sbreest of the times, with up-to-date change,sntheir buildings,or:may be indisposedo supplant;lder with net and


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TlLeRealtE BI e Book af CaLifornjarnodern structures. Demands as to rentals may, under the conditionr,be exorbitant. Old tenants seek never buildings and more satis-Iectory rentals. Thus the environment is radically changed, much toth det meDt of all.Normal gro*4h and normal expansion of business sections ndi-cate progress anal growing wealth. But sudden ard remote trars-plantings of business cente$ indicate lack of stability and of plan-ning in eity development. These exterd to lessen the North of busi-nessDroperty as a pelmanent investmDt.History of cities proves that changes n location of the businesscntersare not uncommon. But history, Iike chality, covers a n1ulti-hrde of sins. and we should leam from what it teaches.Most cities are. iD a measure, "after-thoughts," as to their devel-opment, and original locations were not the ideal. They grew fromarmy posts, supply stations on the banks of streams or harbors, orcross-roadsmerchandise stores. or the like.Los Angeles originally was a Mission Pueblo, located near, andeasily accessible to, the water supply of the river. The irrigatedlands wer-e o the south and southeast. The hills were to the west.Latei came the railroad, with its line ol demarcation. The mouth ofthe cornucopia lay to the south, southeast and southx'est, andrichly have thsprofrted thereby.INDUSmIALpRopERTy. As industries arc, in many cases, gov-emed by municipal ordinance, and as rail road trackage, fuel andlower and transportation facilities and many other highly technicalfeaturescome nto the valuation of indust al property, these will notbe dealt with here. Sufiice it to say that, in many cases,ploper valu-ation of this class of property requires even mor-e close study andexperiencehan either residenceor business. Nearly ever-y ne knowsat least something about the latter two, whereas very few are in anyway familiar with industrial rcquirement or advantage.GENEp,Al.-Improvementssually determinemainly the Ievenue-productive alue of proper-ty. But there s andthermaterial element,and hat is, lhe Drospectite uture of the propedy. If the Dlobablefuturepoints toward a decreasen the possiblerevenue, hen thepresent rcductivevalue may be higher than the mar-ketvalue. If,however,he probable uture indicatesa greater possible roduction,then he market value may properly be higher than the presentpro-ductive alu. This introducesa certain degaee f speculation, nd itis recognizeals a worthy elementof land value. How far it shouldbeconsider-eds a mattel requiting good udgmcnt on the part of theappraiser.Many rules have been devised for appraising city prope*y, andfor determiningcomparativevalues,as to long and short lots, andcomerots. Someuse a 100foot lot on a 100per cent basis. Someuse 150 oot lot on a 100per cent basis. Someessaymathematicallyto calculatehe valueof eachsquare oot in a lot, and someassume olay downdefinite ules for percentageso be addedby rearon of alleyexposure,he percentagesarying as to the width and the locationotthealley.All of these rules may be made to serve good purpose,and to givemore or less scientific deductions. But no science can be reduced to

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176 Thenealta Bl e Book ol CltUfolniamathematical accuHcy, unless the laws which govenr are the immut-able a\ s of Cod,as extrcssed n nature.This fact may also be an excuse or widbly differing opinions asto real estate valuations.But by whatever rules, oI by whatever Drocessof reasoning, com-petent and expedenced applaisers arrive at their ultimate conclu-sions, it bordels on the ridiculous to find, in courls oI law, expelt tes-timony given, which in some instances, has been known to vary onehundled Der cent. If the so-caIled high values" were taken as a basisof "market valu" (and this is what the expert testifies to), then a50 per cent loan, on such a basis, would actually buy the proper-tyonthe basis of the so-called "low market value." On the other hand, ifthe latter figures were used by the jur-y, in a condemnat ion suit, theproperty o\:i'nerwould :rpDalently be despoiledof 50 per cent of hislawful possessions. Either conditior involves an anomaly.CoNcr,USIoN.-An appraisal is b]ut L}.eopinion ol the appraiser.His ability and experience,his knowledge of values, his study of sales,of rentals, of th Dature and prospect of the pmperty, and his analysisof all the many factors which affect or defect the valu of the landunder appraisal, and last but not least, his own personal integ:rity,-all these and many such pl'ove the worth of his efiort in the deter-minat ion ol Markct Value.


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Appraiser Valuation of Real Estate by D.F. McGarry

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