… From Biz2Biz NWA, March 2010
By Carl Grimes, CBI Sunbelt, Lowell
What is my real estate worth?
That is a familiar question asked when we’re helping a business owner prepare for the sale of his/her business. Until recently, the answer could be a pleasant surprise – with their land worth more than they thought.
In the declining economic climate, the reverse is often true – land on which the business sits is worth less than just a year ago.
Do you sell at a loss, then?
A relatively low cost method of accurately valuing business real estate in today’s market is to have a local certified real estate appraiser conduct a short form real estate appraisal. Groundwork and research evaluates the real estate in an informal report, providing a realistic value of the real estate at less than one-third the cost of the typical commercial appraisal.
The seller can then have a realistic idea about the value of the real estate and determine if it makes sense to sell the real estate as an asset of the business.
In many cases it is better from a tax perspective to lease the property to the buyer rather than take a loss in selling. The seller may offer an option to purchase the real estate assets in the future.
If the buyer needs to purchase the real estate to bring the collateral value in line with the purchase price, a formal appraisal will be required. The seller can make the informal appraisal available to the buyer and the buyer’s bank. Since the appraisers are certified they can generally complete the bank’s formal appraisal in less time and for less money. And the seller can often be reimbursed by the buyer for the initial expense of the appraisal as part of the closing costs.
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