Present Value Blog

Appraisal Institute Releases FAQ on Dodd-Frank Financial Reform Law

admin — Thu, 02 Sep 2010 22:15:21 +0000

The Appraisal Institute, the country’s largest professional organization of real estate appraisers, has released a FAQ regarding information found in the Dodd-Frank Wall Street Reform and Consumer Protection Act. This list of frequently asked questions addresses the enforcement of customary and reasonable fee provisions, and forthcoming procedures for creating new rules.

The FAQ clarifies that new real estate appraiser independence requirements can be enforced by state attorneys general under the Act. This increases the authority of the new Consumer Financial Protection Bureau, the lead enforcement agency of Dodd-Frank and other consumer protection laws.

“These FAQs are intended to clarify several misconceptions that we have seen within the lending and appraisal communities regarding the appraisal provisions found in Dodd-Frank,” said Richard Maloy, chair of the Appraisal Institute’s Government Relations Committee. “Most pressing are those provisions dealing with appraiser independence and payment of customary and reasonable fees, both of which are under an expedited rulemaking process. Lenders, their agents, and appraisers should have no doubt that these requirements will commence in October of this year.”

The Appraisal Institute will update the FAQ periodically. To access the latest version, click here.

By: Present Value

Additional Reading:

The Dodd-Frank Wall Street Reform and Consumer Protection Act

The Appraisal Institute

Financial Advisors Urging Business Owners to Know the Value of Their Businesses

admin — Tue, 31 Aug 2010 22:29:27 +0000

Because of the economic downturn, many business owners are reluctant to think about the value of their businesses. Fearful that their businesses have lost value, it’s the last thing they want to hear about. An article in Financial Advisor suggests that many business advisors are urging their clients who own businesses to have their businesses valued in order to gauge their business health and for planning purposes, including adjusting estate and succession plans.

Business owners have different reactions when they find out that their businesses are worth less than they once were. Some decide to delay selling their business, and others use it as an opportunity to make necessary changes. One business owner who was interviewed said that he was glad to know the value of his business because it enabled him to determine steps he needed to take to improve the business and prepare to potentially sell it within 10 years.

According to experts, some businesses are worth 30% less than a few years ago, and they argue that understanding the value of a business can help owners determine whether or not they should sell their business or bequeath it to the next generation. On a positive note, a lower valuation can benefit owners in terms of taxes right now. The article highlights the fact that if owners are planning to pass on the business to their children, now might be the time to do it, since estate taxes are “expected to rise next year and new restrictions on use of trusts could also be coming soon.”

By: Present Value

Additional Reading:

How Does the Economy Affect Business Value?

Strive to Be Unique and Improve Your Business’s Value

Partnership Dissolution

admin — Thu, 26 Aug 2010 19:24:55 +0000

We’ve written about succession planning, buying a business, and selling a business, and the importance of securing an accurate business valuation or asset appraisal in all of these scenarios. But what should you do in a partnership situation if one partner wants to sell and the other doesn’t? In this scenario, things can get a little more complicated.

Typically, if one business partner wants to sell and the other doesn’t, the partner who wants to stay in the business must buy out the other partner. The easiest way to handle this situation is to have written documents in place spelling out the circumstances under which a buyout can occur. These documents should be written when a partnership is formed, long before either partner would even consider leaving the business. But if these documents do not exist, there are still ways to handle this delicate situation effectively.

The first step is to determine the net value of the business. This includes all physical assets, like real estate or equipment, and all soft assets, like trademarks or business reputation. Also included in a business’s net worth are profits, as well as any outstanding debts or invoices. Determining the business’s net worth will help the partners decide, ideally through an intermediary, what to offer the partner leaving the business and how much money the remaining partner will need to raise in order to complete the buyout.

After the net value is determined, the partners can discuss the details of the transaction and make sure that their plan is feasible. In many cases, because this scenario can be difficult and emotional, it is best to hire a lawyer or a mediation professional to help in the process.

By: Present Value

Additional reading:

Succession Plans

Buying a Business? Make Sure to Do Your Homework

Property Values in the Age of Foreclosures

admin — Tue, 24 Aug 2010 21:34:44 +0000

In the old days, the real estate industry, at its heart, was very simple. Houses were built, houses were bought, houses were sold. When there was a greater demand than supply, more houses were built and the cycle continued. It was one of the country’s economic cornerstones.

Today, with the economic recession still holding tight, the cycle is all but nonexistent. Homes are being foreclosed upon, sold at a fraction of their worth, and there isn’t enough capital to invest in new properties, let alone finding people in the economic situation to buy them. REOs and short sales are the norm.

As a side effect of the battered real estate economy, homes that are being appraised are being unfairly compared to the sale prices around them – sale prices that are way below market value. But it’s a vicious cycle that has no end in sight. One house is being appraised low and sold low, and the similar house next door is appraised low, and the house next door to that, and so on and so on.

Industry insiders were hoping that new home construction might help jump-start the buying-selling cycle, but with the glut of foreclosed homes on the market, why would anyone pay full price for a new construction?

What’s the solution? Right now, there isn’t one. Like the rest of the sectors of the economy, the real estate industry will just have to wait.

By: Present Value

Additional reading:

Real Estate Owned (REO) Property

Home Affordable Foreclosure Alternatives

The 7-Step Scope of Work for a Typical Machinery and Equipment Appraisal

admin — Fri, 20 Aug 2010 02:09:45 +0000

As part of a typical machinery and equipment appraisal, the appraiser will outline the scope of work involved in an assignment. The USPAP (Uniform Standards of Professional Appraisal Practice) has put forth guidelines that machinery and equipment appraisers should include in the scope of work. The minimum standards for scope of work include the expectations of the client and other users and the actions of other appraisers who carry out similar assignments.

When you engage an appraiser, these are the steps that an appraiser typically will take prior to determining the value of your machinery and equipment:

Identify the assets to be appraised
Define the purpose of the appraisal
Establish the valuation date for the appraisal
Determine the appropriate valuation concepts and approaches to be used
Determine the type of valuation study to be completed
Select the type of appraisal report to be provided
Check the availability of data and information

The scope of work is the first step in any appraisal. Without a specific scope of work, the conclusions of an appraisal may not stand up to scrutiny.

By: Present Value

Additional Reading:

Certified Machinery and Equipment Appraisers: Present Value

Certified Machinery and Equipment Appraisal

What’s It Worth?

How Does the Economy Affect Business Value?

admin — Tue, 17 Aug 2010 21:55:59 +0000

In The New York Times’ blog, You’re the Boss, there was an interesting perspective on business valuation in today’s economy. The post was titled “Still Waiting for the Value of your Business to Recover?” and the blog author turned to a professional business broker for answers.

The article gives great news for buyers and less than great news for sellers. Sellers who call in a professional appraiser to determine their business’s value in preparation for a sale may have to be willing to settle for a sale price less than the business’s worth. Buyers are skittish these days. They’re looking for a sure thing, and they may not have much cash to make a purchase.

But a seller shouldn’t necessarily wait for an economic recovery that will make his or her business worth what it was a few years ago because it might never happen. It’s the same advice given to people interested in selling their homes. And some sellers who want to retire or who have to sell because of financial reasons may not have the luxury of waiting. The good news is that there are things these owners can do to make their businesses more attractive.

For example, show some interest in your business. Make sure the grounds are attractive, your collateral is up to date, and workspaces are clear of clutter. Your interest will show potential buyers that this is a business to be proud of. Take a long, honest look at your business and decide if you’d be willing to pay the asking price. And of course, get an appraisal so that you know what your business is worth when negotiations begin. Finally, accept the best offer you can get, and then move on from your days of business ownership with pride.

By: Present Value

Additional reading:

Strive to Be Unique and Improve Your Business’s Value

Brand Strength Contributes to a Business’s Value

Still a Buyer’s Market

Four Methods to Determine a Property Value

admin — Fri, 13 Aug 2010 03:43:42 +0000

Real estate appraisals are, of course, the best method of determining the value of a property. But did you know there are a few other methods that brokers and lenders will sometimes use to determine a value? Here are four of the most popular methods used:

Broker Price Opinion (BPO). BPOs are used by lenders in certain situations – for example, pending foreclosure – where they don’t want to order a full appraisal, which costs more and takes more time. It’s important to note, though, that BPOs are not appraisals. They are merely used to get a property’s value.
Comparative Market Analysis (CMA). When a realtor wants to calculate a property’s worth, he or she will use a computer-generated value known as a Comparative Market Analysis. Some agents use recently sold property with similar features or similarly listed properties to determine a number. CMAs are free from real estate agents, but because agents are looking for business, they will sometime skew the numbers to the buyer’s liking.
Automated Valuation Model (AVM). Lenders use this automated computer program to analyze data regarding a property. At the end of the data analysis, the AVM creates a value range and places the property at a specific point within that range. AVMs tend to be of little practical use, however, because they don’t take into account renovations or other property alterations that could increase or decrease the value of a home.
Real Estate Appraisal. Appraisals are done by licensed professionals to determine the market value of a home. Because they are performed by experts with real-world experience and years of training, they are the best choice for determining an accurate property value.

By: Present Value

Additional reading:

Be Sure to Use a Reputable Appraiser

Appraisal Review

The Importance of Inventory Appraisals and Asset Verification Services for Businesses and Lenders

admin — Wed, 11 Aug 2010 00:15:16 +0000

Businesses often need inventory appraisal and asset verification services to meet federal government requirements and the ever-changing regulations in their industries. They could also be looking to secure financing or investments, which would require the verification of their existing collateral. Additionally, investors and lenders, especially in a difficult economy, want to know where and how their money is being used. And, they need to know that the business assets they support are physically on a company’s premises, year after year.

Inventory appraisal and asset verification services can include barcoding, software implementation, spreadsheets, and valuation with detailed information for an easy-to-use and adjustable platform, and can range from a one-time data collection service to an ongoing yearly service contract.

Present Value offers many types of inventory appraising and asset verification, including, but not limited to:

Furniture fixtures and equipment (FF&E) appraisals and verification
Barcoding and tagging of assets with or without valuation
Implementation of inventory management systems
Asset verification with or without valuation
Inventory appraisals of stock, products, and goods

Contact Present Value to learn more about our inventory appraisal and asset verification services.

By: Present Value

Additional Reading

Case Study: Pre-Loan Asset Verification

Case Study: International Medical Device Manufacturer

Case Study: Southern California Healthcare Provider

Strive to Be Unique and Improve Your Business’s Value

admin — Thu, 05 Aug 2010 22:07:17 +0000

There was an interesting article in the Fort Worth Business Press today called “Strive to be unique; it’s where the real value is.” The article discusses business owners who, after having a business valuation performed, want to know how to increase the value of their business. The predictable answer is to work toward increasing bottom-line profits, but there’s another, more effective way of improving your business’s worth: Differentiate yourself.

If this is something you’re interested in pursuing, the article offers a few things to try. For example:

Offer superb customer service
Work on developing your research and development capabilities
Provide a reliable product
Build a lengthy and enviable customer list
Make sure that you have stellar people in key management positions

Other things that help your company stand out, but that you may not be able to control, include the ease with which other competitors can enter the market and whether your business is the only one of its type in your territory.

If you’d like to increase the value of your business, which is an especially good idea if selling the business is part of your plan, try implementing some of these techniques. Then test your success by contacting a reputable business appraisal firm and asking them to determine the value of your business.

By: Present Value

Additional reading:

Determining a Business’s Selling Price

Brand Strength Contributes to a Business’s Value

Hard Lessons Learned in Real Estate Appraisal

admin — Wed, 04 Aug 2010 01:21:39 +0000

One of the recurring motifs of this blog has been the importance of using an experienced, licensed real estate appraiser with an established reputation and a good standing within the industry. The reasons are, for the most part, obvious. You’re more likely to get a fair and accurate appraisal of your home. You’ll have a more positive experience during the appraisal itself. And the appraisal report will stand up to scrutiny by the courts, the IRS, and other appraisers.

Still think it’s worth saving a little money and hiring a non-certified appraiser? Consider a case that went to court just this week in Yorktown, New York, in which a real estate appraiser was arrested for stealing an $8,500 diamond ring from a home she was appraising. Yes, she was caught, but imagine if she’d been in your home and stolen something of great monetary or sentimental value to you. Does the bargain real estate appraiser still seem like a bargain?

Make sure you go with trustworthy certified appraisers like Present Value for your real estate appraisal. We provide a higher level of professionalism that caters to our clients’ individual needs, and we are certified, licensed, and FHA approved.

And we don’t steal stuff.

By: Present Value

Additional reading:

Be Sure to Use a Reputable Appraiser

What, Exactly, Are You Doing, Appraiser?