I did something fun and picked up another old-school book to review today :) McMichael’s Appraising Manual by Stanley L. McMichael. 3rd edition circa 1948 – shortly after World War II.
Only this time around it wasn’t nearly as fun as last month’s Thrift book we reviewed, unless you’re a diehard real estate fan and/or master appraiser, haha… (I picked it up on impulse thinking it was gonna cover a bunch of different topics, but sadly it was only real estate… Though I did learn another important lesson here besides taking my time before purchases: NEVER GO SHOPPING WITH A CRYING BABY!! YOU GET NO TIME BEFORE PURCHASES! ;))
Still, it did keep my attention for a solid half hour at least, so I thought it was still worth sharing with you fine people. Especially the parts on what “value” means to people. I had no idea there were so many definitions – and types – of value out there! Or, that after World War II The U.S. had debt as much as $200,000,000,000 and more! At least according to the book… Which was then followed by a section on how “there will be insistent demands for new houses, apartments, automobiles, and household equipment and furnishings, as well as all kinds of consumer goods” in order to “maintain America’s standard of living.” 60 years later and it still hasn’t stopped, eh?
Here was my favorite clip from the entire book. AKA the beginning because I almost fell asleep after chapter two ;)
In every transaction which price is involved, four elements influence the amount of the price:
- The value of goods to the seller.
- The value of goods to the buyer.
- The value of money to the buyer.
- The value of money to the seller.
Since these elements constitute the fundamentals of the law of supply and demand, variation of any of them causes a change in price.
How true, right? We all value “things” and money differently, so when two people meet to do a transaction, naturally there will be some sort of disconnect. But when both parties are equally happy, a lovely deal is made and they both walk away feeling like they won! Which I guess is why yard sales are so damn exciting for both sides of the deals – one gets rid of “junk” and the other gives pennies on the dollar for “treasure.” Win-win!
I also learned that price and value are never static. And that “normalcy in real estate is difficult, perhaps impossible, to find.” Since the market continually swings from booms to depressions and then back again. (Though I feel like “normalcy” would be fairly constant at least smack in the middle of each period, yeah? Like during the booms prices would be high, and then during the depressions they’d switch to being low? Until things turn back one direction or the other? But I’m no scholar, of course…)
I then got a schooling on all the different measurements of value.
We’ll start with a quote from Alfred D. Bernard that I thought was pretty interesting:
“Value of bread is expressed in need; the value of a glittering diamond is expressed in desire. The value of real estate is often the expression of both or either”
Which then led to a plethora of other different meanings and types of values. All compiled from a variety of people and places too – which I assume were the best definitions the author could find on such topics:
Market value: “The quantity of other commodities a property will command in exchange: specifically, the amount expressed in terms of money which a purchaser would be justified in paying for a property as of a certain date, assuming he were to acquire thereby all the rights and benefits to the equivalent extent possessed by the owner.”
Speculative value “is actually not a value at all but the price an owner hopes someone will pay for his property on a rising price market. It is created through booms, high-pressure selling, rapid growth of a city, entrance of large new business enterprises into a community, construction of a new railroad, discovery of oil or minerals, and other abnormal but natural factors.”
Sentimental value “attaches to properties held by old families or owners who for reasons of personal attachment do not desire to part with their holdings. It is no basis on which to determine market value.”
Absorption value “is the value attributed to a small inside property, sandwiched between large and important building enterprises, which earns an abnormal rental per square foot as compared to adjoining property by reason of the intensive use to which it may be put.”
Nuisance value “is really not a value at all but actually a minus element and a term applied to a condition creating a nuisance which limits the value of a property itself or of its neighbors, or both.”
Tangible value is “practically the same thing as intrinsic value or economic value.”
Pretty pictures and graphs!
It was at this point I stopped reading and started skimming :) All the way to the end where the pretty pictures and graphs were, haha… Here’s a sampling of what I saw:
Chapters I never got to:
Most of the chapters were what you’d expect to see in a real estate appraisal handbook (“Appraising Homes,” “Depreciation,” “Compensation For The Appraiser,” etc) but a couple did stand out more than others… Perhaps you can guess which? ;)
- “Testifying in Court”
- “Appraising Gasoline Stations”
- “Evaluating Timberland, Shade and Fruit Trees”
- “Determining Value in Foreign and In Negro Neighborhoods”
- Don’t buy books while babysitting
- Everyone values property differently
- Everyone values money differently
- The real estate market isn’t ever “normal”
- Old books are still awesome, even for mere eye candy
At $6.00 I’ll take the lessons learned and call it a wash :) Though let me just point out that the theory on how most money principles stay the same over the years is still very much valid! As evidence in both this book, and the last (more fascinating) one we reviewed simply titled “Thrift.” If you haven’t checked it out yet, I highly advise you do. That ones dates back to the late 1800’s!
I’d like to leave you with one last clip from the book, if I may. This one coming from the legend himself, Mr. Confucius, 500 years before the birth of Christ. Even further proving that money principles hold true over the years:
“The value of thy property” said Confucius to his scholar, “dependeth upon thy neighbor!”
So be sure to treat them well! :)