You may be considering selling a holding….or of refinancing one. For most, the next step will be…get an appraisal. After all, how can a seller or a lender know what the Value is without one? But wait….there is an inherent problem…An appraisal is not the True or Actual Value of a property.
We all know what an appraisal is. Without going into a litany of Valuation Elements…..it is the “Current Value” based on use, income, comps and condition. There is no time projection of Value Elements…there is no attempt to reveal, define, support and monetize any type of Future Value. Whaaat, ”that doesn’t make sense” you say. No, it doesn’t.
A lender will conventionally shy from speculative risk especially associated with a refinance, and a buyer….well, the last thing a buyer wants the seller/owner to know is of any type of Added Value Strategy that will dramatically, in some cases, exponentially…. increase “as is” Current Value.
The Actual Current Value of an asset is not the Appraised Value;it is the Appraised Value + a percentage of the difference between Appraised Value and available Highest and Best Use Future Value.
Regardless of size, use, location, etc….The Value of every asset can/should be evaluated/driven in this way.
Let me provide a couple examples….
Recently we were retained to do a Development Feasibility Valuation (DFV) on a small site in Essex County. The Assessed Value was/is $415,000. A recent Appraisal came back at $550,000. Our DFV came in with an “as is” Current Market Land Value of $1,450,000. We are now under contract and out of DD at $1,400,000. The seller here did not get any approvals, did not do any cap improvement…did not spend a dime.
We were asked to do a DFV for a 2 acre industrial site in Essex County. The site had just been appraised at $6,500,000. We monetized Highest and Best use and fully supported an “as is” Current Market Value of over $13,000,000. Again, the seller is not doing anything to realize this Value Increase…in this case a doubling of Appraisal Value.
Knowing the Accurate or True Value of your asset(s) and or an acquisition candidate …..puts you in control of ultimate return.
Why leave any sale or deal proceeds on the table!