-fr

The Rea,ltuBltueBook ol CaLilonLia

D. F. I{C(IAERY
tl0rrrcr l>resid.trt Irultu tunrrl
Los An|el.s
172 TIL1lle(Ltlt Blue Boak of Cal:ifonriu

Ap praisal-
Valuation of Real Estatc
B?/ D, F. MoGARRY

. Ma.tlrct Vullte-Lot:tLt,iol, Utitit]|, Si.e, Shupe Resitlen-

l.iol- Blt si l tess P ruw t.jt D erft ( i.tt ian-Ob NL)tes
cenLe.

f T , \ o u l d l , e r , t . s r , r ' r p , r , o J . ,pnn d c : r o , l o l L / l r ), o \ p r . r r r as b j 4 , l
-I uf Attfjti"rl. ir, ' e Lref 2,ri, p, ard nu ! v ' ) l b c m a d et o
Jo C e r t . i n I u , L l I - r ' a J p | i r ' . : p l F s\ M" iflflbord i l . d i . ap d , i n r h p
hop€ that" usome
.
advanlage nray acclue to lhe readel..
The term "Applaisal," as used jr thjs djscussion, means the
deter.minatiorl of "Mall(et Vaiue."
"MaRKET VALUE" js held by courts of larv to be,,that pl,ice ex-
pressed ir1 terms of rroDeJ f(rl which a property 11.ouldsell in the open
matket, the sellcl no1 beiDg obligcd to sell and the buy€r not being
obligedto buy;the sale to be madc, subject to conditiors usu.rliD th;
conrnunity, and with a Ieasonable time gileD to eflccl such sale.,,
It is evidcnt, thereforc, that ^n AL)1tr1ist,liDvohes studt., exDe-
derlcc and iudgment, rvhereas in an actual S(l€ il oft-timcs haDpcns
that Foltune or Fancy is the guiding gcnius. To exptessan opiDion
about anolher pelson should never be co|sidefed a tlivial rratter..
One's leputatioD is aD individnal asset.
Sinrilarly, one's propelty is his material asset, nnd a cur-sory or.
casual oDinion as to its va]ue, may prove unfair and un\vise. yei it is
not uncommorl for glatuitous valuations to be given by those who
do not aplleciate the possiblci|justice invohed.
Tax valualions, in their \,er'y natlrre, ale comparatile, and
prcpctly should be conselvative.
Loan v.rluations geDelalll- ale color.ed\\jth a modicunl of deDr,es
Bion,if not pessirnism.
Plomol.ion vaiuations, howcvcr, rsuallt beam with the I esptcn,
denceof plospect and optimjsm.
Dach of these ralcln rellecls the corlect nrar.kel value.
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, thc
Sahara Deselt is as il. is, and Caljlolnia has what it has,-a by
le?rsonof l,oGtiorl. As ir1 geoglaphy, e\e mot'c so iD realty valua-

Co irg from afar, one observesthe rast expa)lseof more or less

:rrid aleas, virtually rvorthless, save for.(attle )ange; then conresthe
"big farn" couDtry, $'ith its trading posts; then- 1e.,snall farm,'
counlr'l'witll its hamlcts rnd villages; then the intensivetycLrltivated
 The Re( t! Btue Rook of Co,kfornill t73
''little farm" districts nearer centers of population; then the sparsely
settled subdivisions; then the "newer" homes;then the "older" homes;
then the outlying "small store" districts,-and finally $re arrive at the
"business section" of the industdal or commercial metropolis.
It will have been obseNed that land values along the main high-
ways have been higher than those more lemot€.
Accessibility is the explanation.
Ingress to, and egress from, any given location determine how
and for what puryose any property is available.
UTiLrry Th€ use to which a ploperty is, or can be put, is a
measur-eof value. ID country plope*y, the nature and quality and
net revenue of crops are to be considered. These depend upon soil,
water and climate. Oldinarily, good land without water is a poten-
tislitv.
Ilany crops require cer'taiDmean daily and nightly temperatures
duling the growing seasons. In Califomia, climatic conditions afiord
a v.rst valiety of fafm and orchard product, but the-sedifTer ir1 kird
and quality by reason of soii, watel conditions and freedom from or
subjection to extrcmes of atmospheric condition.
ID city plopedy, bloadly speakirlg, the maiu uses ale Residence.
Business and Industrial.
RESIDDNCE.-The$-or.thof proper'ly for home pur'Ioses has many
phases. The working man requires hone sites conveniert to transpor--
tation facility, which \1.i11r'eadily convey hin] to and f)'om his work.
Time with him is of moment. Also, advartage accrues if his cost of
livjng may be iessenedby home soil pr-oduction. Nea less to school
and mark€t 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 residence dist cts
include all these and mor'e.
SuBDlvlsloNs.-Moneys expendedon subdivision property should
€ffect needed advantage in utility of production, othelwise the added
capital may not add colresponding increment to the market value.
This utility and production ar-e keenly subject to the law of supply
and demand. Many times we ffnd miles of subulban acreage despoiled
of its use as such, and prenatulely tlansfonned irto "town lots,"
without any local demaDd fol ar increase in the supply of this class
of prcperty. The resultant condition is eithel that these excrescences
re-mainfor years as mute t bute to the malpractice of the promoter,
or are Dassedon to his successorin interest, whose main excuse for-
beingtitle osner can b€ charged to irlexperierce or' an over-eDthusias-
tic imagination.
BUSINESSPRopERTy-The rental production of plopelty and its
prospeclshave nruch to do with values.
In most cities the center of the businesssection is usually the peak
pojnt of land values. This is due to the fact that such proDedy can
b€ made to produce the greatest reveDue on any given unit of area
with the least pelsonal relationship on the palt of the owner.
Congestionof traffic creates greatel denand, and makes for the
hishest use ot larid. The most valuable land is that most svailable to
 r74 The ned,ItABIue Book of Cakfornin

the-greatestnumberof people. As private ownership,however,limits

individual control. and as the lrend of confineslimits nalure of use,
it is evidentthat Szzeand ^Slrope of lots alsoafect valuesat any given
location. Further, all lines of businessare not of equalmonetarypro-
duction; the.nature of the businesswhich can utiliie any plot oi land
is a determining factor. Retail businessis generally the most pro-
ductive,and usuallydemandsland having the most accessible location.
From this high point valuesdecreasealongthe main a*eries of travel
of the purchasingpublic. Paralleland intersectingaderies reflect,in
a measurp, the valuesof thp main ar.tel.ies.
Width of streets,nature of traffic, transportationsemice,and all
such. have their influence.
Retail businessis like a stream; it flo\Msalong the line of least
resistance,and lvhen it encountersan obstacle,is diverted,and again
follows a simila.r course. There is this difference,however.-the
stream flows t'o?, its source the retail businessflows toflrardsits
DEpREcrATroNOBsoLEscENcE-Thesetwo elenents are fre-
quently underestimated,and, by the ordinary investor, oft-times
ignored. The tru€ test of a good land investmentshould be over a
term of ten or twenty yeaN, at least.
If the net incomeof rmprovedbusiDessproperty will not pay a
fair rate of interest on the investmentover and abovea sinkins fund
ro writa ofr depraciarion in i hp improvements,or if thp prospectlvein-
creasein the land valuewill not carefor the deficit.then -lhe
sr€at caution
should be cxercisedas lo the amount to be added for so-ealled
improvements. The combiningof capital as construction,and capital
as land into enduring and efficient revenueproduction,is much more
difficult than many appr.eciate. How often do we find the syrEnetry
and beauty ol adjoinitg proper-ty msrred by the injudicious location
of apartmenl housesand sl,orebuildings, when such investmentsdo
not. and cannot,ba'ore physi(aldeprc.iariol,arrackslhem, produce
sufii.icniincompro havpwananledlheir construciion.
Someovners seemto concludethat if they controlthe only vacant
lot in a block, improved with residences,it is a magnificent oppor-
tunity to erect an apartment house or store building, without coniid-
ering the needof the iocality for either an apartmenthouseor a store-
What i-sthe result'? They not only add to tlieir oi,.n burdens, but also
damage their neighbols. By reason of aalvancesmade in architecture
and in structural methods-by reason of increa.sins demanalsof the
public for modern convenicnces and ul)-lo-dateequipmelt- m*nt
buildings become obsolete much more rapidly than their ph',sical
depreciationwould warrant.
Also. misplacedor misfit buildings may lack efficient utility and
becomemore or lessobsoleteupon lheir complelioD.
Obsolescence in utility is alsocausedby changeof Iocalconalitions
as to tmffic and business, In some instances a quondarn well
jmproved properry is seriouslyimpair.edas to ijs usesby the migr&
tion of !he_businesscenter. Neighboring property owners mat be
derlnng lalr revenueon the originalcosi of their'holding6, and may
be ad!€rae to keeping sbreest of the times, with up-to-date change,sin
their buildings, or:may be indisposedto supplant;lder with net and
 "T

TlLeRealtE BI e Book af CaLifornja 175

rnodern 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 to
th€ det meDt of all.
Normal gro*4h and normal expansion of business sections indi-
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 investm€Dt.
History of cities proves that changes in location of the business
c€nters are 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 from
army posts, supply stations on the banks of streams or harbors, or
cross-roadsmerchandise stores. or the like.
Los Angeles originally was a Mission Pueblo, located near, and
easily accessible to, the water supply of the river. The irrigated
lands wer-e to the south and southeast. The hills were to the west.
Latei came the railroad, with its line ol demarcation. The mouth of
the cornucopia lay to the south, southeast and southx'est, and
richly have th€s€ profrted thereby.
INDUSmIALpRopERTy. As industries arc, in many cases, gov-
emed by municipal ordinance, and as railroad trackage, fuel and
lower and transportation facilities and many other highly technical
features come into the valuation of indust al property, these will not
be 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 and
experiencethan either residenceor business. Nearly ever-yone knows
at least something about the latter two, whereas very few are in any
way familiar with industrial rcquirement or advantage.
GENEp,Al.-Improvements usually determinemainly the Ievenue-
productivevalue of proper-ty. But there is andthermaterial element,
andthat is, lhe Drospectitefuture of the propedy. If the Dlobable
future points toward a decreasein the possible revenue, then the
presentprcductive value may be higher than the mar-ketvalue. If,
however,the probablefuture indicatesa greater possibleproduction,
thenthe market value may properly be higher than the presentpro-
ductivevalu€. This introducesa certain degaeeof speculation,and it
is recognizealas a worthy elementof land value. How far it should
beconsider-ed is a mattel requiting goodjudgmcnt on the part of the
appraiser.
Many rules have been devised for appraising city prope*y, and
for determiningcomparativevalues,as to long and short lots, and
comerlots. Someuse a 100 foot lot on a 100 per cent basis. Some
usea 150foot lot on a 100 per cent basis. Someessaymathematically
to calculatethe value of eachsquarefoot in a lot, and someassumeto
lay downdefiniterules for percentagesto be addedby rearon of alley
exposure, the percentagesvarying as to the width and the locationot
thealley.
All of these rules may be made to serve good purpose, and to give
more or less scientific deductions. But no science can be reduced to
176 Thenealta Bl e Book ol CltUfolnia

mathematical accuHcy, unless the laws which govenr are the immut-
able la\ s of Cod, as extrcssed in nature.
This fact may also be an excuse for widbly differing opinions as
to 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 one
hundled Der cent. If the so-caIled"high values" were taken as a basis
of "market valu€" (and this is what the expert testifies to), then a
50 per cent loan, on such a basis, would actually buy the proper-ty on
the basis of the so-called "low market value." On the other hand, if
the latter figures were used by the jur-y, in a condemnation suit, the
property o\:i'ner would :rpDalently be despoiled of 50 per cent of his
lawful 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 analysis
of all the many factors which affect or defect the valu€ of the land
under 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-
mination ol Markct Value.