Evening star., 1938-06-11
ECONOMIC CEILING
PUT ON REPAIRING
Utility One of Basic Factors
in Determining Value,
Appraisers Told.

There is an economic ceiling on the
amount of expenditure justified for
repair or modernization of residential
properties ceiling whose lifting or
lowering needs to be watched in de-
termining a proper modernization or
repair program. George I. Moves of
San Francisco tcld a special session
on appraisal methods held this week
by the American Institute OF Real
Estate Appraisers of the National AS
sociation of Real Estate Boards.
This ceiling, Mr.. Noyes explained,
Is set by average family income and
neighhorhood purchasing power. From
the point of view of appraisal value
q contemplated expenditure cannot
be justified where the completed job
will result In a cost in excess of SINH
lar houses offered in competition.
But utility Is one of the basic factors
IN determining any property's value
ana modernization which will bring
about increased utility is in most cases
fully justified.
Deed restrictions. ordinarily a strong
protection to property values. may il
they involve specific cost requirements
for building. become under changed
economic conditions an impeachment
TO neighborhood development, he
warned. The same thing Is true of
utilities provision in excess of de-
mand.
Economic Justifica ton.
The buying public today has a tend
ency to give greater consideration
than formerly to the economic justifi-
cation of home ownership and, like
the professional appraiser, is tending
to Judge the value of house as the
capitalization Of its rental possibilities,
Mr. Noyes said.
Interior and exterior decorating,
such as painting, papering. etc, in
crease the eye appeal of a house or
apartment building and almost invari-
aoly their cost can be recaptured.
Repairs to foundation and structural
replacements, which are not easily
discerned by the average purchaser.
reflect added value to lesser degree"
Mr.. Noyes said.
Changes having tendency to make
the house suitable for higher-type
occupancy, be they structural changes.
modernization. changes in floor plan,
removal of partitions, installation of
modern plumbing and heating equip
ment, or other change. will, in most
instances, cause an increment in value
in excess of cost"
Utility Provision.
Mr.. Noyes pointed out utility pro-
vision for residential property and
building restrictions applying to it as
two matters to be watched today for
economic change that may affect the
value of the property. Utilities such
rs sewer. water, gas. electricity, paw
Ing. etc, all are desirable Lack of
utilities indicates heavy future as
sessments and usually low property
values. However, the growth and de-
Velopment of district may be seri-
ously retarded by installation of utili-
ties in excess of demand. Result: Ex-
cessive burden. vacant competitive
land and acquisition of many lots by
the city and county for unpaid taxes
and assessments. Low property values
are inevitable
Restrictions and zoning are equally
important and must be carefully con-
sidered. They are designed and in
tended to protect property values
However. due to changes in economic
conditions, the limited purchasing
nf "a
NIT of purchase that involves compli-
snce with costly building restrictions
except in small percentage of cases.
Where requirements specifying high
level Of building cost exist, the result
Is likely to be partially developed
subdivision, and unless the area is
held by financially strong organiza-
ton, lower lot values will result"
Approach to Valuation.
capitalization of rentals is being
recognized more and more as an ap-
proach to valuat ton of residential
properties Mr.. Noyes said. THE ap-
praiser, however, must be conversant
with the proper use and determination
Of capitalization rates giving proper
consideration to the risk involved,
current rates OF interest, rental f1uc-
tuation, future trends and future DO
tential value. While it is recognized
that in the past single-family resi-
Dental properties, classed as non-in-
vestment properties, have not been
bought or sold on a capitalization
basis, advanced students of appraisal
have been impressed by the tendency
OF the buying public to stress capitali-
xation in giving greater consideration
to the economic Justification of home
ownership. Undoubtedly, wide public
discussion of housing projects, and
consequent wide publicity given home
ownership and the long term, low-in-
terest contracts of purchase now avail
able are responsible for this trend"
!, AS an illustra ton of the value in
crease that may come through mod
ernization if it increases utility, as
may be done If the program is built
An a thNrNit0p