Going Concern Forum Valuation Issues in Appraising Realty ...

[Pages:77]Going Concern Forum Valuation Issues in Appraising Realty and Non-Realty Components

Going Concern Appraisals

Small Business Administration

50-10(5)C-ch.3:2. APPRAISAL REQUIREMENTS - October 2010

(7) If the appraisal engagement letter asks the appraiser for a business enterprise or going concern value, the appraiser must allocate separate values to the individual components of the transaction including land, building, equipment and business. When the collateral is a special purpose property, the appraiser must be experienced in the particular industry.

Going Concern Appraisals

Interagency Guidelines released December 2010:

Each appraisal must contain an estimate of market value, as defined by the Agencies' appraisal regulations. The definition of market value assumes that the price is not affected by undue stimulus, which would allow the value of the real property to be increased by favorable financing or seller concessions. Value opinions such as "going concern value," "value in use," or a special value to a specific property user may not be used as market value for federally related transactions. An appraisal may contain separate opinions of such values so long as they are clearly identified and disclosed.

Going Concern Appraisals

Overview

1. Guidance 2. Definitions 3. Types of Real Estate Assets with Realty and Non-realty

components 4. Overview of non-realty components 5. Guidance on Going Concern Valuation 6. Appraiser encounters with going concern and non-realty

valuations Lending Ad Valorem taxation Eminent Domain Estate Valuation

7. Divisions and Allocations

Going Concern Apprasials Guidance

1. Guidance Guide Note 5 & USPAP

Going Concern Appraisals Guide Note 5

effective May 6, 2011

Going Concern Appraisals Guidance Note 5

? The valuation of personal property, business property, or intangible assets requires specific expertise.

? The expertise of a personal property or business appraiser may be needed in some cases.

? Before accepting an appraisal or appraisal review involving such assets, an appraiser must ascertain that she or he has the expertise to complete the assignment competently

Going Concern Appraisals USPAP

USPAP

? In developing a real property appraisal, appraisers are required by S.R. 1-2(e) (iii) to identify "any personal property, trade fixtures, or intangible items that are not real property but are included in the appraisal."

? S.R. 6-2(g) (ii) makes the same requirement regarding mass appraisals.

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