Real Property Appraisal versus Business Appraisal

Real property appraisers complete appraisal assignments on vacant and improved land and at times they appraise "going-concern" properties that additionally include an associated business entity.

Properties that are valued as a "going concern" include; motel / hotels, convenience stores (c-stores), cemeteries, ski resorts, restaurants, bowling alleys, mini-storage, lube centers and car washes.  Since the tangible and intangible assets of the going-concern property are required to generate it's income, the elements are cannot be reasonably separated.

Properties of this type have value because they are established, or "proven," and have continuity.  Historical financial data is necessary when appraising a "going-concern," without strong evidence of its past operation that allow for the projection of future expectations an appraiser is doomed to failure.

Some real property appraisers are challenged by "going-concern" assignments since they require analyses that are not used in real property appraisals.  Since "going-concern" appraisals require the analysis of the business operation it's important for real property appraisers to become familiar with business appraisal concepts.

Business appraisers value business entities, business ownership interests and the securities associated with them.  While their are appraisers that appraise both real property and businesses there are relatively few in number.

It has been my perception that business appraisers generally have a background in accounting, financial analysis or economics and while business appraisal standards have started to take hold, the report that you receive will still have a lot to do with the appraiser and his emphasis.

Business appraisal opinions are formed based on economic principals and methodologies that are similar to those used in real property appraisals.  A sales comparison approach, a cost approach that considers assets including inventory and an income approach that requires the analysis of operating statements to determine a net income.  Gross and net income multipliers are also calculated for comparison.

While real property appraisals and business appraisals differ, they have similar analytic approaches, and "going-concern" real property appraisals cross over into the business realm given their inclusion of a business entity.
 
For more appraisal information contact Glenn Rigdon, MA,MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

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