Welcome to
The Present Value Blog
We are a full service appraisal firm that can meet all of your appraisal needs. We began as a real estate appraisal firm known for its integrity, professionalism and being on the cutting edge of its industry.
Small Business Lending Still Considered Sluggish, According to Federal Reserve
Despite recent indications that banks were beginning to lend to small businesses again, which we discussed in a recent blog post, at a recent small-business forum, the Federal Reserve chairman, Ben Bernanke, indicated that he was still concerned about the lack of small-business lending.
A recent New York Times article notes that experts are unsure why small-business lending has continued to decrease. Bernanke was quoted as asking: “How much of this reduction has been driven by weaker demand for loans from small businesses, how much by a deterioration in the financial condition of small businesses during the economic downturn, and how much by restricted credit availability?” He then went on to say that it was likely all three were contributing factors.
The article posits that small business owners believe that lenders are not lending to creditworthy businesses because of heightened paranoia following the economic downturn, while economists cite potential borrowers’ weak economic fundamentals as the reason for sluggish lending.
According the article, lenders say they have returned to basics in terms of lending fundamentals after being too lax, which means conducting more careful due diligence, including taking into account businesses’ collateral and cash flows. Understanding what lenders are looking for and how a certified appraisal fits into lending criteria can help business owners find the funds they need to grow.
By: Present Value
Additional Reading
Glimmers of Hope in Small-Business Lending
5 Cs of Lending (How Appraisal Fits in Even Though It Doesn’t Start with C)
Lenders Turn to Present Value LLC for Pre-Loan Due Diligence
Freeing Up Much-Needed Cash
When we’ve discussed online auctions in the past, we’ve typically talked about them as a simple way to sell machinery or equipment when a business fails. But what if your business isn’t failing? Maybe you’ve experienced a bit of a slowdown – and if you have you’re not alone – but are still holding strong. The local news station in Terra Haute, Indiana, described this type of situation yesterday in their article, “Terra Haute Airport Gains from Online Auction.”
The airport had several planes that it used for flight instruction, but noticed that enrollment was dwindling. Rather than let these unused planes sit on the ground gathering dust, the airport decided to engage in an online auction to sell the planes, free up some cash, pay down debt, and help the airport thrive. Four planes have been sold so far, and not only has the airport been able to pay down debt, it’s saved thousands in insurance and maintenance costs. Seems like a smart move.
If this is a move your business may consider, contact Present Value. Our certified machinery and equipment appraisers will appraise your company’s assets and facilitate the auction process by acting as liaison between you and one of the two auction houses with which we partner. Give us a call, and we’d be happy to help you explore your options.
By: Present Value
Additional reading:
Much Rejoicing as Financial Reform Bill Passes
The Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping financial regulatory reform bill that includes the first modernization of real estate appraisal regulations in more than 20 years, has passed through the Senate, and now awaits President Obama’s signature to become law.
“This bill will mean good news for consumers because they should see more reliable home appraisals,” said president of the Appraisal Institute Leslie Sellers. “It will encourage the use of highly trained and competent real estate appraisers, and will provide much-needed resources for oversight and enforcement.”
The Dodd-Frank Act is the first overhaul of appraisal regulations since the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989. The House passed the bill on June 30, 2010, and President Obama is expected to sign it into law shortly.
The Dodd-Frank Act will require that “reasonable and customary” fees be paid to real estate appraisers. Appraisers have complained that with the growth of appraisal management companies (AMCs) since the passing of the Home Valuation Code of Conduct (HVCC) in May 2009, they have experienced sharply reduced fees from these appraisal management companies. “Reasonable and customary” fees will reflect what the appraiser would typically be paid for the assignment without an AMC. Under the new act, violations of this policy will result in severe penalties.
By: Present Value
Additional reading:
The Dodd-Frank Wall Street Reform and Consumer Protection Act
Mortgage Players Look to Soften Bill
Common Definitions of Value for Machinery and Technical Assets
We talk a lot about the importance of knowing the value of your machinery and equipment, but sometimes the language used in the industry can be confusing. It’s also important that you are able to understand what all of the terms mean when you engage a machinery and equipment appraiser. Below are some common definitions for different appraisal values as they apply to machinery and equipment, as defined by the American Society of Appraisers.
Fair Market Value is the estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, as of a specific date.
Fair Market Value – Removal is the estimated amount, expressed in terms of money, that may reasonably be expected for an item of property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell and both fully aware of all relevant facts, considering removal of the property to another location, as of a specific date.
Fair Market Value in Continued Use is the estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date and assuming that the business earnings support the value reported. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs to make the property fully operational.
Fair Market Value – Installed is the estimated amount, expressed in terms of money, that may reasonably be expected for an installed property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs, necessary to make the property fully operational.
Orderly Liquidation Value is the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.
Forced Liquidation Value is the estimated gross amount, expressed in terms of money, that could typically be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an “as is,” “where is” basis, as of a specific date.
Liquidation Value in Place is the estimated gross amount, expressed in terms of money, that could typically be realized from a failed facility, assuming that the entire facility would be sold intact with a limited time to complete the sale, as of a specific date.
Salvage Value is the estimated amount, expressed in terms of money, that may be expected for the whole property or a component of the whole property that is retired from service for possible use elsewhere, as of a specific date.
Scrap Value is the estimated amount, expressed in terms of money, that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.
Insurance Cost New is the replacement or reproduction cost new as defined in the insurance policy less the cost new of the items specifically excluded in the policy, as of a specific date.
Insurable Value Depreciated is the insurance replacement or reproduction cost new less accrued depreciation considered for insurance purposes, as defined in the insurance policy or other agreements, as of a specific date.
Present Value is always available to answer any other appraisal questions or needs that you may have. Please feel free to contact us.
By: Present Value
Additional Reading:
Know the Value of Your Machinery and Equipment Before an Auction
Determining a Business’s Selling Price
There was an interesting article today in The New York Times blog, You’re the Boss titled “Determining Your Company’s Value: Multiples and Rules of Thumb.” In the article, the author describes a meeting she had with a business owner interested in selling his business. All of his paperwork was in order, the business was profitable, and he was determined to sell; however, she felt his asking price was way too high – 11 times the company’s EBITDA.
It is appropriate, when determining the value of your business, to include a multiple; however, there are standards that determine the multiples that you should use. For example, if the business owner talking to the blog author was selling a wind farm, his asking price wouldn’t have been too far off the mark. When selling a wind farm, you can multiply your EBITDA by 10.
Of course, there are many factors that go into determining a business’s value, such as intellectual property, competitive advantage, and inventory, but the bottom line is that determining a business’s value isn’t easy. That’s why it’s so important to work with a professional who understands all the factors that will help you determine the most accurate value of your business, which will help you decide on a sale price if you’re seeking a buyer.
By: Present Value
Additional reading:
Fannie Mae Plays Hardball
As we all know, real estate appraisers are the men and women in the field, going from property to property and making evaluations based on years of training and experience, and then reporting these numbers to mortgage lenders to establish property values.
But after receiving appraisals they feel are too high, some lenders have taken to performing desk reviews – appraisals done from a computer. While qualified real estate appraisers are able to perform accurate desk reviews if need be, lenders’ desk review values can be wildly inaccurate. Since there is no on-site inspection, they don’t reflect the condition of a house, they don’t add value for remodels, they’re often lacking information even on room additions, and so forth. Nevertheless, lenders are using desk reviews as justification to reduce appraised values, and sales continue to fall apart.
Fannie Mae has announced that effective September 1, 2010, lenders will no longer be allowed to reduce appraised valuations. Instead, they will be required to contact the appraiser to resolve discrepancies between the appraiser’s value and the desk review value. If the disagreement can’t be resolved on that level, the lender will be required to order a second appraisal.
By: Present Value
Additional reading:
Certified Machinery and Equipment Appraisers: Present Value
Present Value has performed an extensive number of machinery and equipment appraisals worldwide. A certified machinery and equipment appraisal is compliant with USPAP standards and the standards of the National Equipment & Business Builders Institute.
Whether you need to know the fair market value, orderly liquidation value, and/or forced liquidation value of your equipment, the professionals at Present Value can provide you with a certified equipment appraisal report in a timely manner at a competitive cost. Our certified equipment appraisals will meet the requirements of financial institutions, government agencies, buyers and sellers, shareholders, and partners. Our experience and expertise extends across all machinery, equipment, and technical specialties. Below are examples of some of the industries in which we specialize:
- Health Care and Medical Industry – Examples of equipment appraised: MRI Imaging Systems, CT Scans, Ultrasound Equipment, Dental Offices, Nursing Homes, Hospital Equipment, Cardiovascular, Ophthalmology, Nuclear Imaging, Orthopedics, Surgical Centers, EP Systems, Physical Therapy Clinics, X-Ray Machines, Advanced PET Systems, PACS Systems, and more.
- Manufacturing Industry – Examples of equipment appraised: Plastics Manufacturing, Machine Shops, Woodworking Equipment, Agriculture Equipment, Routers, Sanders, CNC Equipment, Lathes, Conveyers, Air Compressors, Industrial Tanks, Brake Presses, Extruders, Saws, Planners, Vacuum Pumps, Drill Presses, Benders, Die Cutters, Saws, Molds, Tooling, Cutters, and more.
- Heavy Equipment and Construction Industry – Examples of equipment appraised: All Yellow Iron, Excavators, Compressors, Stackers, Aerial Lifts, Crushers, Spreaders, Backhoes, Cranes, Dozers, Rigging Equipment, Skid Loaders, Shop Equipment, Oil Field Equipment, Asphalt Plants, Washing Equipment, Incinerators, Drilling Equipment, Generators, Railroad Equipment, Tractors, Trucks, Trailers, Environmental and Recycling Equipment, Sweepers, Soil Stabilization Equipment, Aggregate Equipment, and more.
By: Present Value
Additional reading:
Institutional Financing
Given that banks recently have been reluctant to make loans to businesses with stellar credit, businesses with poor business credit scores or start-ups have little chance of receiving a bank loan these days. In fact, studies have shown that fewer than 15% of start-up capital comes from banks. Luckily, there are ways to raise money other than by obtaining a bank loan, such as institutional financing. Institutional financing is capital that comes from institutions other than banks, such as credit unions, venture capitalists, and insurance companies.
One of the best ways to help ensure that your company will receive institutional financing is to be well-prepared for the decision. Work to increase your business credit scores by limiting your amount of debt and increasing your number of credit transactions; be able to prove your business’s growth potential; have a stellar business plan in place; and be prepared to tell a potential institutional lender your business’s current worth.
By securing a certified business valuation, you can make institutional financers sure that the business valuation you give them is USPAP-complaint and meets the standards of the Society of Business Analysts (SBA).
By: Present Value
Additional reading:
The Appraisal Foundation Announces 2010-2011 Edition of USPAP
The Dodd-Frank Wall Street Reform and Consumer Protection Act
In our recent blog post, “Mortgage Players Look to Soften Bill,” we wrote about a new real estate bill – the Dodd-Frank Wall Street Reform and Consumer Protection Act, known simply as HR 4173 – that Congress was working on, and how mortgage lenders were hoping that some of the provisions in the bill would be adjusted to improve the state of the real estate appraisal industry.
Well, the final version of the bill is ready for a vote, and the real estate appraisal community is applauding the new measures, which are the first modernization of U.S. real estate appraisal regulations since the Financial Institutions Reform Recover and Enforcement Act (FIRREA) was enacted in 1989.
“We applaud the conference committee’s efforts and urge Congress to pass HR 4173,” said Appraisal Institute President Leslie Sellers. “We are extremely pleased that this bill will protect consumers by encouraging the use of highly trained and competent real estate appraisers with much-needed resources for oversight and enforcement.”
If passed, the measure would:
- Establish a federal appraisal independence standard, sunsetting the HVCC
- Require AMCs to register with state agencies
- Enhance appraiser competency provisions, including clarification regarding consideration of professional appraisal designations
- Provide financial resources for oversight and enforcement
The vote is slated to take place sometime in July.
By: Present Value
Additional Reading:
Case Study: Desktop Equipment Appraisal
Present Value LLC worked on an international project involving equipment being purchased from the United States and delivered to two locations in South America: Brazil and Chile. Due to time constraints, the client requested we perform a desktop appraisal.
Once the client provided Present Value the necessary details, photos, and information on the equipment, we conducted all necessary research and developed the appraisal report. The client was very happy with the appraisal because they got the certified report they needed in the timeframe required.
Because the machinery and equipment appraiser does not visit the site of the equipment being appraised, a desktop machinery and equipment appraisal requires the client to provide the appraiser with all the necessary information for each of the items to be appraised, such as photos, make, model, hours, mileage, years, and original cost. The appraiser then performs an appraisal from his or her desk, as the name implies, based on all the information provided by the client.
By: Present Value
Additional Reading
Common Types of Appraisal Reports
Recent Posts
Categories
- Appraisal Terms
- Asset Inspection
- business appraisals
- business broker
- Business Valuation
- Buying a Business
- C Corp to S Corp Conversion
- Case Study
- Certified Machinery and Equipment Appraisers
- Custom Appraisal
- economic stimulus package
- equipment appraisal
- Equipment Auctions
- estate planning
- Fannie Mae
- FHA Loans
- Freddie Mac
- Goodwill
- HVCC
- Intellectual Property
- Inventory Control
- loans
- Machinery & Equipment
- Machinery & Equipment Appraisal
- Press release
- Public-Private Investment Program
- Real Estate
- Real Estate Appraisal
- Sample Reports
- SBA
- SBA SOP changes
- small business
- Small Business Administration
- small business loan incentives
- succession planning
- Tax issues
- Uncategorized
- Valuation Fraud
- Videos
Tags
Recent Comments
- William on Cover Your Assets: Divorce Appraisals
- Alison Shuman on Private Mortgage Insurance
- In theory (disregarding any other marketplace variables), the proceeds from sale of a bond will be equal to? | Structured Settlements on Much Rejoicing as Financial Reform Bill Passes
- Dorinda Sahota on Uniform Residential Appraisal Report
- registry cleaner on Appraisal Organizations Address Letter to the FHA