Evening star., 1934-05-26
FAIR APPRA|SALS
HELD ESSENTIAL
Head of Washington Real
Estate Board Voices
View.
BY A. C. HOUGHTON

a. ~ oAN
President Washington Real Estate Board.
During the phenomenal rise In
values which took place after the
World War, when market transac-
tions were thick and fast and the
security assumed in each new deal a
higher value than in the former, it
T. forget the fundamentals OF ap-
praisal practice and totally disregard
anything but the market transactions
Fair market value is much-used
term in seeking the value of real
estate; but it should in no case permit
capitalization to a point far in excess
of the intrinsic value of its basic
parts or, as at the present, be per-
mitted to carry the value excessively
in the other direction. The price
paid for property does not necessarily
indicate what one is justified in pay
ing and it is because of this fact
that sales should not be conclusive
evidence of value.
Unsound Appraisals Blamed.
With the crash of the stock market
in 1929 came the depression and the
chaotic conditions of the real estate
and mortgage market. Life savings
of innocent investors we're swept away.
Unsound appraisals made by men
unfit by temperament, training or ex-
perience to value real estate offered as
security in many cases may be charged
with the responsibility. In other cases
appraisers, sincere in their intentions,
believed the value to be the value of
the land plus the cost of the improve
ments without taking into considera-
ton the economic influences having
much to do with the future benefits
to be derived and which make for
the success or failure of the property
as whole. This type of appraisal is
referred to as the summation pro-
cess and is condemned by well-in-
formed appraisers.
Institute Was Formed.
It was during this period that the
Appraisal Division of the National
Association of Real Estate Boards
realized the Importance and need of
more sound and intelligent appraisals
and decided to bring together under
strict rules of practice and ethics
those best qualified to do this highly
technical and analytical work. To &C
complish this end the American In
stitute of Real Estate Appraisers was
formed at the 1882 convention of the
National Association of Real Estate
Boards in Cincinnati under the spon-
sorship of that body. So rigid have
been the requirements that only about
500 candidates have been thus far
admitted, although many thousands
have applied. The present member
ship may be said to be a roster of
some of the ablest valuation experts
in the United States. 1t has been
well stated IN the Standard of Prac-
tice of the Appraisers Institute:
The profession of real estate ap-
praising calls for men of integrity,
analytical ability. experience and
knowledge. Upon the opinion of the
appraiser are based financial trans
actions of great importance, and his
honesty Of purpose must be above
suspicion; in his professional capacity
he must be absolutely disinterested;
he is charged with judicial respon-
sibility and must act with absolute
impartiality; he has moral respon-
sibilities to interested parties and to
the investing public. These duties
and responsibilities cannot be prop
erly discharged unless his motives.
conduct and ability are such as to
command confidence and respect"
Much has been done in the past
five years to protect the public from
losses caused by ill-advised and in
competent valuation Justified opin-
ions rendered by those having the
proper qualifications are being sought
rather than simple certificates of
value, with the result that the pub
lie may be fully informed as to value
back of all mortgage securities issued.