Evening star., 1938-02-05
APPRAISAL PLAN
OF FILA. IS CITED
Capitalizing Gross Rents Is
Procedure Outlined by
u. S. Official.

The Federal Housing Administra-
tion has developed the procedure of
making appraisals of dwellings by
capitaliZing the gross rents, it was
announced today by Frederick M.
Babcock. director of F. H. AS under
writing division
In arriving at the gross rental on
dwellings, the method depends largely
on the consumer appeal factors which
influence dwelling purchases and
measure Is made of those factors
which tend to render greater service
to owner occupants than to the tenant
occupants, Mr.. Babcock said Thus, it
will be seen that the gross monthly
rental value is greater to a typical
buyer interested in owner occupancy
than to a typical buyer interested in
landlord ownership. This greater
value to typical owner occupant is
known as an amenity increment in
the system and is expressed as a per-
centage over the rental value to
typical landlord owner, according to
Mr.. Babcock
Not Replacement.
The new method. arrived at after
more than three years experience by
the Federal Housing Administration
with over a quarter million residential
mortgages accepted for insurance.
does not replace the present appraisal
and valuation system pioneered by
F. H. A. 1t will. however, serve to
further reduce the possibility of error.
according to Mr.. Babcock. and is
being installed as standard procedure
in all insuring offices as rapidly as
possible.
appraisal methods in the past gave
too little consideration to the type and
the kind Of home Mr. and Mrs.
America actually wanted and would
buy Mr.. Babcock said TOO little
consideration was also given to the
extra services or amenities which An
owner occupant actually receives as
compared with those according to
tenant occupant. These amenities. in
the case of owner occupants. can be
broken down into broad classiflcations
which include: ID Pride of owner
ship: (2) freedom of action. and 90
sense of security. Through its expert
ence in accepting quarter OF mil
lion residential mortgages for insur-
ance F. H. A. has been able to measure
these amenity values.
Extra Benefits.
Under the new method of appraisal
the value of the extra benefits or serv-
ices an owner occupied home may be
expected to confer are determined by
a rating of owner-occupancy appeal.
This rating considers the following
features concerning the property and
the neighborhood, and is made by local
p. H. A. appraisers: Appearance and
approach. life-stage, prestige, social
pattern. eye-appeal from the stand
point of the actual property itself,
functional quality. newness. neighbor-
hood detractions and property inappro-
priateness. This rating of owner-oc-
eupancy appeal. when reflected in the
estimated monthly rental value of the
property, indicates the derived month
" value of the property or the value
nj the direct services of the property
10 the typical purchaser interested in
occupancy for his own family.
After determination of the derived
monthly value the total valuation is
estimated through a procedure involv-
ing the use Of conversion factors pred
icated largely on the property rating
and the location rating
Step Forward.
I'VE believe our new 'amenity-cOm-
parison method marks another step
forward in appraisal processes. The
results from this method balanced
against two other estimates serve to
set the upper limits of possible value |
The two other control factors and |
estimates are replacement cost of the
property and the available market |
prices of similar properties offering the !
same facilities Therefore. with few
exceptions under isolated circum-
stances. the lowest of the three esti- |
mates will be the valuation ascribed to
the property. In other words, if the !
replacement cost of property or the
available market price is lower than
that arrived at by the 'amenity- COM
parison method which takes into con-
sideration the added amenities accru-
Ing to owner occupants, the lower fig
IRE will constitute the valuation. II
the newly devised plan produces the
lowest figure it will be set as the
valuation"