Property Appraisals Asset
appraisals are now one of the most effective
tools used by financial institutions, landlords, as
well as anyone making important financial decisions.
Fair Market, Liquidation
Value and Replacement Cost, are the three types of appraisals
most commonly requested. Most appraisals are requested
by lawyers or financial institutions. Why would an Appraisal be ordered?
• to settle an estate - probate
• to provide equitable asset distribution
• to provide fair market value for sale to a third
• to determine value of assets in the case of
a separation and divorce
• to obtain a loan (Small Business Development
• to establish replacement cost for insurance
· business valuations
Fair Market Value or Going Concern
This type of appraisal is used to determine the value
obtainable for the assets through private negotiations
between a willing buyer and seller on a total entity
basis in order to continue operations in place, over
an acceptable period of time.
The values will be higher than those
of a Forced or Liquidation appraisal while still reflecting
the age and usage of equipment.
Replacement Cost Value
Although this type of appraisal is common
for insurance purposes it has become the most important
tool for financing Small Business. Small Business Loan
financing requires an accredited appraiser to conduct
a detailed appraisal of existing assets as well as taking
leasehold improvements and set up cost into consideration.
The purpose of this appraisal is to justify the money
previously spent to start the business. Therefore verifying
that the requirements of the financial institution were
met as well as the Federal Government of Canada in the
case of government guaranteed loans.
Forced or Liquidation Value can be defined
as the price paid for goods when there was a financial
situation, or other circumstances, existing at the time
of the sale so as to require a sacrifice. This type
of appraisal is used by financial institutions in order
to determine options in a distressed situation.