Posted by David Butler on December 07, 2009 at 14:15:03:
In Reply to: Need a note appraisal for tax purposes posted by Abdenour Achab on December 06, 2009 at 19:08:48:
Hello Abdenour,
I am not certain why a note appraiser would have to be acceptable to Equity Trust Company exactly, but that is probably not a bad idea for the sake of having a second opinion with regard to credibility.
The situation is not unusual at all. The majority of note valuation assignments include are related to IRS issues in one way or another. A close second is likely to be note valuations related to disolutions of partnerships, corporations, and similar ventures. Two other frequent circumstances include valuations for divorce and estate/probate settlement purposes.
There is no "accredited" recognition of "note appraising" in any state, to my knowledge. There is some note appraising experience generally held by some members of the business valuation community, due to the fact that they do a lot of personal property valuation, and have a lot of experience in dealing with a number of complex valuations based on liquidity of assets under a given set of circumstances. Legitimate business appraisers generally are certified through the Institute of Business Appraisers and/or the National Association of Certified Valuation Analysts - but note appraising all by itself is not an essential part of the curriculum at this point in time, to the best of my knowledge.
Over the years, I have completed several such assignments - the majority of which were initiated by tax attorneys, and occasionally by CPA's. In these instances, some valuations were extremely complex, while others were somewhat simple. One important factor in all such assignments was that the appraiser had to show a demonstrable background in asset valuations that would stand-up to challenges by the "other side". I have written about this from time-to-time over the years, due to the fact that for some period of time during the early part of the decade, a marketing ploy in the private note industy became centered on offering "free" note evaluations, and soliticing note appraisal assignments as a method for generating income through marketing - while hopefully developing note leads at the same time.
Nice concept for note brokers, but not such a good idea for note holders who need such valuations for serious purposes such as the several situations I mentioned at the outset of this reply.
An important part of the process in such assignments is a clearly defined "Valuation Engagement", which generally will include several important characteristics, including, among other things;
1) clear identification of the property (note and collateral in this case) to be appraised;
2) scope of report to be issued;
3) intended use of the appraisal;
4) any known limiting conditions;
5) special instructions from client, or attorney/CPA
6) effective valuation date...Part of the process in that respect goes to the final determination of what kind of fee the appraiser would generally look to charge for the valuation assignment. Do keep in mind that part of what you pay for in such cases is the credibility the appraiser is attaching to the report itself, by virtue of background experience. And the potential liability issues he/she needs to work around. That comes with the territory.
Hope that helps, and best wishes for a satisfactory resolution of your situation here.
David P. Butler
- Re: Need a note appraisal for tax purposes Abdenour Achab 21:28:37 12/09/09 (0)