result in any direct sales. The second type more frequently results in direct sales of specific property.

2. In order for advertising to produce any results at all it must be believed. Careful statements must be made with a tendency toward understatement rather than overstatement if advertising is to be believed.

3. The general types of advertising which the dealer uses are newspaper, outdoor, direct by mail, and miscellaneous such as pencils and blotters. All these types are effective if they are properly used. The choice between them must be made on the basis of which is most effective.

4. Newspaper display in order to be most effective must be easy to read, have plenty of white space, present a picture, sell the utility, and contain the news element.

5. Outdoor advertising must be very easy to read, for it secures usually only a glance of the passer-by. It should, however, be attractive at the same time.

6. Sales letters must be simple, direct, personal, and sincere. Sometimes it is necessary to carry on a long campaign with letters before any results are noticeable.

7. The advertising appropriation should be considered an investment rather than an expense. It may be fixed upon the basis of previous sales, expected sales, or arbitrarily in order to meet the particular situation.

8. The value of slogans and symbols depends upon their content. A slogan or a symbol as such creates no impression upon the mind of the reader. The reason why some slogans and symbols are considered so valuable is that they have been so widely advertised. Their value is not in themselves. The tendency seems to be to discourage the origination of meaningless symbols.

9. Advertising serves as the interpreter of the profession to the public and stimulates within the profession itself higher standards of conduct. The expression of the ideals of a firm contained in public advertisements frequently reacts favorably upon the employees and members of the firm itself and enables the maintenance of standards.

CHAPTER VII

THE VALUATION OF REAL ESTATE

Questions

What general economic law does the value of real estate follow? What are the factors that determine the supply of land? What relationship is there between the cost of bringing land into use and the supply of land? Why would the value of land probably fall if population should remain constant? What effect does the cost of production have on the value of farm land? the distance from market? good roads? Explain the capitalization of rent. What features are essential to a manufacturing site? To a wholesale site? To a retail site? To a residential site? Why does the suitability of improvements to their location affect largely the value of real estate? How is the value of a lot found by the capitalization of income method? What two factors must be carefully considered in estimating the value of buildings? How can an unimproved lot be valued? What are some of the common rules for distributing values over the depth of a lot? What is corner influence?

In order to deal intelligently in any commodity, a man must be able to judge its value; real estate dealing is no exception to the rule. No man can expect to succeed without this fundamental equipment. But judging the value of real estate is a highly complicated problem-one which requires for its solution the accumulated wisdom of experience as well as the knowledge of underlying principles. Experience can be greatly assisted by knowledge; in other words, upon problems which are constantly con

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fronted in experience, a flood of light may be thrown by acquaintance with fundamental principles. While the value of a specific piece of property will in every case be affected by forces beyond the purview of general principles, and must be arrived at by a particular procedure, it follows certain general laws which are sufficiently universal in character to be spoken of as principles.

Real Estate Values Follow Certain Economic Laws.The basis of value in real estate is the same as that in any other valuable thing. The value of real estate arises from its desirability and its scarcity-another way of stating that it depends upon the demand and the supply. An analysis of the demand for real estate and of its supply would enable one to arrive at its value, and changes in one or the other of these forces would bring a change in value. It remains, then, to determine what constitutes the desirability of real estate, and what the source of its scarcity; that is, its demand and supply.

There are three factors which chiefly affect the supply of land: the actual amount of the earth's surface, the cost of bringing into use those parts of this surface which are not now being used, and the proportion between available land supply and population. The first of these factors is relatively fixed and unchangeable; while small tracts of land may be made available by drainage or by filling, the general proportion of the earth which is "dry land" it is impossible to change. The second factor operates upon the well-known law of diminishing returns. Great tracts of desert could be reclaimed by irrigation, barren fields could be made to bring forth produce by processes of fertilization and tilling, but the costs of bringing these tracts into use would be so great that so far, on the whole, they are left unproductive. It is frequently considered an economic waste to let these tracts of barren land lie idle.

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But a much greater waste would be involved in bringing them into use. To expend labor and capital upon them when it might be put to greater productive use upon lands that are already producing is like "throwing good money after bad." For lack of appreciation of this principle many a dealer has bought and attempted to market farm lands so situated that the cost of putting them under cultivation was so great as to doom his efforts beforehand inevitably to failure; city real estate dealers have attempted subdivisions which could never succeed because of their natural disadvantages; and countless investors have found their resources dissipated through an attempt to redeem, an unwise purchase of land that was never adapted to the purpose for which they bought it.

The third factor affecting the supply of land is its proportion to population. If population is doubled, while the actual amount of land available remains fixed, the supply of land is cut in half for each individual.

But population affects the value of land also by creat ing new demands for it.

The increase of population calls for the production of more goods, and the production of more goods calls for the utilization of more land or more intensive use of present area. The utilization of more land compels reaching out after the less productive fields and those more difficult to bring into production, while intensive cultivation increases the demand for more land because of the law of diminishing returns; and consequently the value of the land is increased. It would seem, therefore, that the value of land would be in direct proportion to population, but there is one circumstance which intervenes to check this normal tendency. The constant improvement in methods of production enables a larger amount of produce to be

1 See R. T. Ely and others; "Foundations of National Prosperity."

secured from the same area of land with the same labor and capital. An improved plan, which would cost no more than an older method, or the substitution of a modern tractor for horse power, though no more expensive than the latter, might enable a farmer to produce a far larger crop. Another example of this principle is seen in the tendency of land to decrease in value in cities whose population is not increasing. The more efficient use of present areas causes the demand for land to decrease with a falling off in value. Thus population might increase just enough to absorb the increased production without causing any change in the values of land; or if population stood still, the value of land would gradually fall.1 Doubtless some day it will be known what rate of increase in the population must be maintained in order to keep values constant.

The demand for land in cities arises from commercial or residential needs. In general, it will be evident this demand depends directly upon population. Land values will be highest where population is most concentrated and least valuable, as urban land, where population is most thinly scattered.

The elements of value in urban real estate which is used for different purposes are found in the peculiar adaptability of the land for its purpose. Real estate, for example, that is highly desirable for manufacturing purposes is usually equally undesirable for residences. It is necessary, therefore, to examine, first, why real estate is desirable for each of the general purposes for which it is used, and then by what means a definite valuation can be arrived at for a specific property.

Valuation of Agricultural Land.-Agricultural land is valued on the whole for its ability to produce marketable

1 See Richard T. Ely; "Costs and Income in Land Utilization" (Ann Arbor, 1922), pp. 53-55.