Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: [v. 91, no. 2343]: February 8, 1913

Text version:

AND NEW YORK, FEBRUARY 8, 1913 ■ I lillili EFFICIENCY IN APPRAISING VALUES How to Go About It—Factors That Affeqt the Operation—Ana¬ lyzing the Factors—Unit Values—The Mathematical Operation.* ■iiiiiiiiiiiiiiiiiiiiiiiii By E. W. DOTY. illlllilllllllllllillllllllillllllllillllllillM^^^^^^^ I ____________la case of cotton cloth after the expert has judgeiJ the value of a unit of that cloth; namely, a yard. Let us analyze the possibilities under this method. 'When you say that land on a street is worth $500 a unit foot and on another street it is worth $1,000 a unit foot, you really mean that the sec¬ ond street at that point is worth twice as much as the first street. This leads us to see that it is the usefulness of our city streets that we must estimate be¬ fore we can come to a real judgment of the value of the sites abutting.thereon. It is not really site value that we assess or appraise, but really street value. What we commonly call site value or lot value is that part of the usefulness of the street that a particular piece of ground absorbs, and that absorption is based upon the amount of ground there is, its shape, and the relation of both to the street. This latter is mathematical and may be ascertained by mathematics; valuing the street—or the unit value, which is but another expression of the value of the street—is the mental side of the problem. Analyzing the Factors. When we come to analyze the factors that enter into or aflect the value of a single lot, we find that there are not less than three such factors. These three are size, shape and location. Sometimes there are two location factors, as in the 'case of a corner lot, and sometimes there is an alley factor; but we will consider only the three that are in every city lot. ■When you say to me that a lot over on the main street any city is worth $50,000 you mean that a lot of a certain size, of a certain shape and in a par¬ ticular place in that city is worth $50,000. If you change any one of these three factors, you change the value to a suin greater or less than $50,000 prob¬ ably. It is difficult for the human mind to make comparisons of things in combi¬ nation. The natural way is to separate each kind by itself and make compari¬ sons in that way. It is easy for the hu¬ man mind to compare a square lot with a triangular lot; that is, shape with shape; it is easy to compare a lot con¬ taining 10,000 square feet of area with a lot containing 5,000 square feet; that is, size with size; and it is easy to compare location with location, a comparison that more people in a ci'ty make from day to day than any other. So we see that it is necessary to sep¬ arate size, shape and location and con¬ sider each separately. The unit foot makes this possible, because the unit foot is always the same size and the same shape, and it is located in the mid¬ dle of each block, thus leaving the varia- (Continued on page 293.) MUCH is being said in the magazines and upon the platform about the lack of efficiency. This lack of efficiency, as I view it, is largely traceable to the lack of analysis. We are all of us prone to attempt performance without know¬ ing exactly what the task is, what parts make up its whole. In other words, we lack analysis. Especially is this lack of analysis noticeable in the task that we call appraising land values, or as- 'sessing the value when the land is taken in connection with the tax department. You are engaged in the real estate business. Many of you are called upon trom time to time to express opinions as to the value of sites, and your clients always, or nearly always, depend upon you for your judgment of value. You are accustomed to give these opinions with perhaps little thought as to just what factors you base your judgment upon. And yet you never give an opin¬ ion but that you consciously or uncon¬ sciously analyze the factors that cause you to form your opinion. The great trouble is that generally speaking you will not consider all of the factors, or you will consider them out of proportion with each other, without a specific analysis of what you are at¬ tempting to do. The result is that you are much more liable to form your opin¬ ion based upon prices actually demanded or paid for that or similar property; and then it is more difficult for you to sub¬ stantiate your opinions even to your¬ self. If we will all of us analyze the task of appraising before we attempt to per¬ form it, we will be able to give our clients safer opinions of the values of city real estate. Forming an Opinion. Upon examination and reflectio.i we find that the expression of the judg¬ ment of value of a site is but the form- in,g and uttering of an opinion. But we find that there are two elements in the forming of that opinion. In other words, there are two things done to express an opinion of value of a city site: One is mental, the other is mathematical. The mental operation, of course, cannot be done by machinery or by a system. Any number of reasons may aflfect the mi-id of a person about to express an opinion. His mind will sort ut all of those that appeal to him, weigh them and consider them. The simpler the conditio.is for considering all of the factors, the easier ihe mind operates, the more certain is the result of its operation. An expert in cotton cloth considers many facts in ap¬ praising a case of such merchandise, but •Synopsis of an address by E. W. Doty, rep¬ resenting the Manufacturers' Appraisal Com- [laiiy and the Somers Unit System of Realty Valuation, before the New York State Real Estate Association at Binghamton. he does not e-xpress his opinio-i of more than a unit of that cloth, .a yard; nor does he examine every piece of goods in the case, nor all of one piece, but rather a very small part of one piece will answer his purpose. Having exer¬ cised his judgment of the value of that kind of cloth in that market, the ex¬ pression of value is made i.i the price of one unit. Ne.xt comes the mathematical side of the operation, which the same expert may perform or which may be performed by others. A clerk can ascertain the number of units of cloth in the case and multiply and set down the result, which is really the judgment of the expert as to all of the cloth in the case. This operation is just as divisible in judgi.ig site values as it is cloth values, or ought to be. First, a Unit of Quantity. When we come to judge site value we find further analysis necessary; 'that is, analysis of the factors that affect it. To perform the mental side of the task eas¬ ily we ought to have a unit of quantity. Land in cities is the only commodity—if we may call it a commodity—that is bought and sold, for which we have no unit of quantity. If you tell me that land on the next street is worth $500 a front foot, there are four reasons why I don't know exactly what you mean. First, I don't know how deep the lot is over there, I don't know whether the side lines of the lot are parallel or not, I don't know whether there is an alley at the rear or not, and I don't know whether you mean a frontage at or near or far away from the corner. You have to explain each of these items to me be¬ fore you have conveyed to me all that you mean by $500 a front foot. If you and I had 100 of these opera¬ tions to go through, you would have to make 400 explanations to me just to convey your opinions to me. Would it not be better for us to agree upon some unit, say a foot wide, 100 feet deep, with no alley, and the location in the middle of the block? With such a unit of quan¬ tity you can convey to me definite and certain information or opinion which I can criticise and converse about. A Mathematical Operation. If we should do this, we would be able to perform the mental side of our task much easier, because we could talk with more people and absorb more rea¬ sons for our final opinion. Having ex¬ pressed our opinion as to the value of a unit foot, the other part of the task could be performed by anyone who has mathe¬ matical knowledge of the relation which size and shape bears to size and shape. Such work is comparable to the work of the clerk who ascertains the value of the