This section is from the book "Practical Real Estate Methods For Broker, Operator & Owner", by Thirty Experts. Also available from Amazon: Practical Real Estate Methods for Broker, Operator, Owner.
The value of land, however, is not the only value which the appraiser of real estate is called upon to estimate. It is required of him that he shall be able correctly to assign a market value to a combination of the land and any structural improvement that may have been erected on it. In order to be able to do this, however, he does not have to qualify as an expert in construction. He does not have to have a technical knowledge of the trades or of architecture. It will be noted that all that can be required of him is his judgment of value as a trader - that is to say, the market value or what the whole property would bring in the market if offered for sale. This is the value that is required for the purpose of placing mortgage loans, or of purchasing, or for purposes of taxation.
What the building cost to construct, or what the materials in it may have cost in themselves, does not necessarily enter as a factor into the market value of the whole. The appraiser, therefore, does not have to estimate the cost of construction in all cases, though where a new structure perfectly adapted to its situation and purpose is to be valued in connection with the land, the cost of same is usually estimated and added to the land valuation to produce value of the whole.
If, however, the building, though new, is not adapted to the purpose for which it was built, or is ill situated (as a private dwelling in a factory district), its value would be considerably less than its cost and would be based upon the degree of its general or special usefulness. It might be that such a structure, though new, should be considered to have no market value whatever because it was an inadequate improvement of the lot. All buildings depreciate in value through wear and tear and by reason of neighborhood changes affecting their usefulness.
We estimate that fifty years is the full life of a building in New York City, for if at the end of that time it still be as substantial as ever, which is quite possible, it has become old-fashioned and ill adapted to modern wants and its value has merged with the value of the land under it. Hence we have to-day large sections of Manhattan Island, apparently covered with substantial improvements, that are just waiting a market movement to show themselves as really so much land ready for the builder.