Values seen key to lackluster market.

Properties need to be valued at levels at which they could really be sold, not what it is believed someone ought to pay, a prominent real estate investment advisor suggested at a meeting of the Metropolitan New York Chapter of the Appraisal Institute at the Grand Hyatt.

Andrew Wood, SRPA, principal of The Yarmouth Group, urged appraisers and other real estate professionals to value property at a price they know it can be sold for in the market today.

Anthony F. Fasanella, SRPA, president of National Realty Consultants Ltd., of Whitestone, New York and chapter vice president of the Appraisal Institute, said: "We must look at the value of property realistically. Unless buildings are valued at what they can be bought or sold for, the market will continue to lack credibility. There is no question that realistic valuations help move the real estate market. At the same time there is the challenge in determining the value of an empty office building or unsold condominium in the face of future uncertainty.

Wood advised that investors carefully analyze real estate returns compared with other alternative investments. "They go through a reality test," he said. "They have two fundamental questions, 'Should I sell or should I buy.'

"Sometimes they decide it is better to sell even at today's depressed values and put the money in bonds," said Wood. "Investors may form the opinion that the income security of bonds is more attractive than that offered by say, a fully leased office building with three or five year leases in this market.

"Believe it or not there are buyers out there." Wood told the New York appraisal group. His clients sold a suburban office building and a research and development property within the last two months.

"You can't look at real estate in isolation," Wood explained. "Like everything else, real estate is an investment. You have to look at the alternatives and then price it accordingly."

Buying opportunities do exist, he said. Regional shopping centers offer particularly good prospects. "We believe their yield compares favorably, on a risk adjusted basis, with stocks which average about three or four percent, he said.

"There are also opportunistic purchases," emphasized Wood. "There are sellers who must sell. There is capital coming to the market. You have to take advantage of the opportunities.

"The best thing that can happen to real estate is that the industry value property at the price it knows it can sell it for in the market today," he said at the Metropolitan New York Chapter of the Appraisal Institute meeting. "Then and only then will it be possible to answer the 'Why not sell?' question. And for buyers, who have a different perception of the market than sellers, help them make the decision whether to buy.

"This variance of opinion, between the seller's and buyer's perceptions, makes an open market. The price they pay is the Fair Market Value.