Evening star., 1936-02-22
APPRA|S|NG COSTS
4 REALTY PROBLEM
Lending Agencies Warned
Against lnsufficiencies of
Certain Theories.

In what appears to be the upswirsg
Of another real estate market, with new
loans, large and small, being sought
and the public being encouraged to
borrow, lending agencies now carving
out new policies of procedure must
realize--and guard against-the high
cost of low-cost appraising, George H.
Coffin points out in the leading Article
of the current issue of the Journal of
the American Institute of Real Estate
Appraisers, technical quarterly of the
institute.
Mr.. Coffin, past president of the Los
Angeles Realty Board and president of
the California Chapter of the Ameri-
can Institute of Real Estate Appraisers,
cites the realization, general among
leading appraisers, that certain of the
formerly accepted valuation theories
were hopelessly insufficient and in
many instances faulty, particularly the
weight which had been given to re-
production costs and the lack of weight
which had been given to analyzins the
economic justification for the existence
of each structural improvement on its
specific site, regardless of reproduction
cost.
PrOfeSSi0nalized Procedure.
Important employers of valuation
services, however. he says, too often
have had no realization of the ad-
vancement which has professionalized
real estate valuation procedure IN the
last decade. Office buildings, indus
trial properties, apartments, hotels,
farm and subdivision acreage, pledged
rs security for large institutional loans
and bond issues, were to often ohndly
appraised on reproduction cost basis,
without regard to complete economic
analysis. Needless millions of dollars
thus went to the financial graveyard.
The years of depression have glar-
fnely revealed the stern necessity of
! approaching each appraisal problem
by many complex highways. Not by,
any single approach can valuation
be measured. The competent ap-
praiser does not reach his conclusion
by valuing land, concrete, lumber,
LABOR and brick by themselves, but by
the evaluation of environing factors,
trends of growth, stability of dis
tricts, taxation and assessment bur-
dens. historical backgrounds and the
effectiveness Of purchasing power
His Investigations must include the
social and income level, the results
of wise or unWlse coming or deed
restrictions, the sufdciency and cost
OF utilities and transportation.
Competitive Influences.
'His study embraces an analysis of
come. past. present and prospective,
and the application of proper cap
italization rates. He must consider
changes in the value of money and
determine varying economic lives He
Is required to measure supply and
demand, over-improvements, under
improvements, and to weigh many
other factors which have a direct
value influence, plus or minus. on
the specific property under consider
alton"
All this means that the real cost
of a hasty appraisal and haphazard
selection of the appraiser may even-
tually be foreclosing on the loan
and all that this entails.
Mr.. Coffin points out. "A compe-
tent appraiser, to become such. is
product of years of specialized train
ing as difficult as any profession;
that avoidance of pitfalls resulting
from seasoned valuation Judgment
entities the properly qualified ap-
pralser to compensation in keeping
with the great responsibility which
Is his"
The lending agency's Loan Com
nittee, he points out. though highly
important in its function, not being
appraisers must ordinarily, in prac-
tice, accept the agency's valuation
reports.