Fair Market Value

[EmptyNest]

I wonder if the B&B Team are reading our forum? They just sent out an email about figuring out fair value for an inn. I'm going to try and paste it in here:
[tr][tr]The Basics of Inn Valuation: never, never forget!
by The B&B Team
As the years go by and we at The B&B Team do our work for current and aspiring innkeepers, there is one issue which never fails to perplex and which is so fundamentally important that we thought we should cover the topic again, briefly. That topic is about the basics of inn valuation.
If you own an inn or hope to some day, you need to have an exit strategy founded on sound principles. If the goal of an exit strategy is one day to sell your inn, you need to know what you will be selling and how the marketplace values it. Fundamentally there are two basic property types in the Innkeeping world: residential and commercial. Smaller B&B's are generally residential, and larger, viable inns and inn businesses are commercial. Each will be valued and financed differently.
Residential real estate is valued based on what the marketplace is willing to pay to live in a given house on a given street and is only limited by supply and demand. The result is that most smaller B&Bs, which are very desirable as homes and have limited income, are worth more as a residence than a business. In fact, they are generally only worth the sum of the real estate and the furnishings. Sellers of smaller B&B's should consider an exit strategy founded upon selling their wonderful home and hoping someone will take over the "business" even if they don't pay you for it. Like most small businesses, when you are done, you are most likely to close your doors and take down the sign, gratified in having enjoyed your Innkeeping experience.
On the other hand, owners of larger, viable inns must remember that buyers are looking for a business, not a house, and everything about their purchase and evaluation will hinge on revenue. Where the smaller inns can and should take advantage of every possible tax shelter, as this is a significant financial benefit of ownership, owners of larger inns should keep bottom line profits in mind as a priority over avoiding paying taxes.
Lenders will want to see three years' tax returns to verify income statements, so it's never too late to begin operating your business like a business. If that means you have to pay some taxes, so be it. Modest increases in net operating income can generate a ten-fold increase in value, dollar for dollar. The increase in value will far outstrip the short term benefits of the tax savings, so report all your earnings and don't pad your operating expenses with personal items. This excludes line items like depreciation, rent you pay yourself, interest expense, and other legitimate deductions.
If you remember these simple principles, you'll enjoy a far more swift and profitable exit when the time comes to move on to your next great adventure!
Click Here to Leave a Comment
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---

The B&B Team, Inc.
Inn Consultants and Brokers Since 1993
With Offices in Virginia and Maine
PETER SCHERMAN ~ P.O. Box 399, Scottsville, VA 24590
(434) 286-4600 ~ [email protected] Twitter PeterInVA
[/td][/tr][/table][/td][/tr][/table].

You didn't look closely enough...I already pasted it here..and I didn't look closely enough because Bree already posted the link to it

 

[swirt]

I wonder if the B&B Team are reading our forum? They just sent out an email about figuring out fair value for an inn. I'm going to try and paste it in here:
[tr][tr]The Basics of Inn Valuation: never, never forget!
by The B&B Team
As the years go by and we at The B&B Team do our work for current and aspiring innkeepers, there is one issue which never fails to perplex and which is so fundamentally important that we thought we should cover the topic again, briefly. That topic is about the basics of inn valuation.
If you own an inn or hope to some day, you need to have an exit strategy founded on sound principles. If the goal of an exit strategy is one day to sell your inn, you need to know what you will be selling and how the marketplace values it. Fundamentally there are two basic property types in the Innkeeping world: residential and commercial. Smaller B&B's are generally residential, and larger, viable inns and inn businesses are commercial. Each will be valued and financed differently.
Residential real estate is valued based on what the marketplace is willing to pay to live in a given house on a given street and is only limited by supply and demand. The result is that most smaller B&Bs, which are very desirable as homes and have limited income, are worth more as a residence than a business. In fact, they are generally only worth the sum of the real estate and the furnishings. Sellers of smaller B&B's should consider an exit strategy founded upon selling their wonderful home and hoping someone will take over the "business" even if they don't pay you for it. Like most small businesses, when you are done, you are most likely to close your doors and take down the sign, gratified in having enjoyed your Innkeeping experience.
On the other hand, owners of larger, viable inns must remember that buyers are looking for a business, not a house, and everything about their purchase and evaluation will hinge on revenue. Where the smaller inns can and should take advantage of every possible tax shelter, as this is a significant financial benefit of ownership, owners of larger inns should keep bottom line profits in mind as a priority over avoiding paying taxes.
Lenders will want to see three years' tax returns to verify income statements, so it's never too late to begin operating your business like a business. If that means you have to pay some taxes, so be it. Modest increases in net operating income can generate a ten-fold increase in value, dollar for dollar. The increase in value will far outstrip the short term benefits of the tax savings, so report all your earnings and don't pad your operating expenses with personal items. This excludes line items like depreciation, rent you pay yourself, interest expense, and other legitimate deductions.
If you remember these simple principles, you'll enjoy a far more swift and profitable exit when the time comes to move on to your next great adventure!
Click Here to Leave a Comment
[/td][/tr][/table][/td][/tr][tr][tr] [/td] [/td] [/td][/tr][/table][/td][/tr][tr][tr]

---

The B&B Team, Inc.
Inn Consultants and Brokers Since 1993
With Offices in Virginia and Maine
PETER SCHERMAN ~ P.O. Box 399, Scottsville, VA 24590
(434) 286-4600 ~ [email protected] Twitter PeterInVA
[/td][/tr][/table][/td][/tr][/table].

You didn't look closely enough...I already pasted it here..and I didn't look closely enough because Bree already posted the link to it

.

Yeah...this thread has either a dejavu or alztheimery feel to it.

 

[EmptyNest]

I wonder if the B&B Team are reading our forum? They just sent out an email about figuring out fair value for an inn. I'm going to try and paste it in here:
[tr][tr]The Basics of Inn Valuation: never, never forget!
by The B&B Team
As the years go by and we at The B&B Team do our work for current and aspiring innkeepers, there is one issue which never fails to perplex and which is so fundamentally important that we thought we should cover the topic again, briefly. That topic is about the basics of inn valuation.
If you own an inn or hope to some day, you need to have an exit strategy founded on sound principles. If the goal of an exit strategy is one day to sell your inn, you need to know what you will be selling and how the marketplace values it. Fundamentally there are two basic property types in the Innkeeping world: residential and commercial. Smaller B&B's are generally residential, and larger, viable inns and inn businesses are commercial. Each will be valued and financed differently.
Residential real estate is valued based on what the marketplace is willing to pay to live in a given house on a given street and is only limited by supply and demand. The result is that most smaller B&Bs, which are very desirable as homes and have limited income, are worth more as a residence than a business. In fact, they are generally only worth the sum of the real estate and the furnishings. Sellers of smaller B&B's should consider an exit strategy founded upon selling their wonderful home and hoping someone will take over the "business" even if they don't pay you for it. Like most small businesses, when you are done, you are most likely to close your doors and take down the sign, gratified in having enjoyed your Innkeeping experience.
On the other hand, owners of larger, viable inns must remember that buyers are looking for a business, not a house, and everything about their purchase and evaluation will hinge on revenue. Where the smaller inns can and should take advantage of every possible tax shelter, as this is a significant financial benefit of ownership, owners of larger inns should keep bottom line profits in mind as a priority over avoiding paying taxes.
Lenders will want to see three years' tax returns to verify income statements, so it's never too late to begin operating your business like a business. If that means you have to pay some taxes, so be it. Modest increases in net operating income can generate a ten-fold increase in value, dollar for dollar. The increase in value will far outstrip the short term benefits of the tax savings, so report all your earnings and don't pad your operating expenses with personal items. This excludes line items like depreciation, rent you pay yourself, interest expense, and other legitimate deductions.
If you remember these simple principles, you'll enjoy a far more swift and profitable exit when the time comes to move on to your next great adventure!
Click Here to Leave a Comment
[/td][/tr][/table][/td][/tr][tr][tr] [/td] [/td] [/td][/tr][/table][/td][/tr][tr][tr]

---

The B&B Team, Inc.
Inn Consultants and Brokers Since 1993
With Offices in Virginia and Maine
PETER SCHERMAN ~ P.O. Box 399, Scottsville, VA 24590
(434) 286-4600 ~ [email protected] Twitter PeterInVA
[/td][/tr][/table][/td][/tr][/table].

You didn't look closely enough...I already pasted it here..and I didn't look closely enough because Bree already posted the link to it

.

Yeah...this thread has either a dejavu or alztheimery feel to it.

.

Ok...you little whipper snapper....one day I will learn to read all and then reply

 

[egoodell]

I wonder if the B&B Team are reading our forum? They just sent out an email about figuring out fair value for an inn. I'm going to try and paste it in here:
[tr][tr]The Basics of Inn Valuation: never, never forget!
by The B&B Team
As the years go by and we at The B&B Team do our work for current and aspiring innkeepers, there is one issue which never fails to perplex and which is so fundamentally important that we thought we should cover the topic again, briefly. That topic is about the basics of inn valuation.
If you own an inn or hope to some day, you need to have an exit strategy founded on sound principles. If the goal of an exit strategy is one day to sell your inn, you need to know what you will be selling and how the marketplace values it. Fundamentally there are two basic property types in the Innkeeping world: residential and commercial. Smaller B&B's are generally residential, and larger, viable inns and inn businesses are commercial. Each will be valued and financed differently.
Residential real estate is valued based on what the marketplace is willing to pay to live in a given house on a given street and is only limited by supply and demand. The result is that most smaller B&Bs, which are very desirable as homes and have limited income, are worth more as a residence than a business. In fact, they are generally only worth the sum of the real estate and the furnishings. Sellers of smaller B&B's should consider an exit strategy founded upon selling their wonderful home and hoping someone will take over the "business" even if they don't pay you for it. Like most small businesses, when you are done, you are most likely to close your doors and take down the sign, gratified in having enjoyed your Innkeeping experience.
On the other hand, owners of larger, viable inns must remember that buyers are looking for a business, not a house, and everything about their purchase and evaluation will hinge on revenue. Where the smaller inns can and should take advantage of every possible tax shelter, as this is a significant financial benefit of ownership, owners of larger inns should keep bottom line profits in mind as a priority over avoiding paying taxes.
Lenders will want to see three years' tax returns to verify income statements, so it's never too late to begin operating your business like a business. If that means you have to pay some taxes, so be it. Modest increases in net operating income can generate a ten-fold increase in value, dollar for dollar. The increase in value will far outstrip the short term benefits of the tax savings, so report all your earnings and don't pad your operating expenses with personal items. This excludes line items like depreciation, rent you pay yourself, interest expense, and other legitimate deductions.
If you remember these simple principles, you'll enjoy a far more swift and profitable exit when the time comes to move on to your next great adventure!
Click Here to Leave a Comment
[/td][/tr][/table][/td][/tr][tr][tr] [/td] [/td] [/td][/tr][/table][/td][/tr][tr][tr]

---

The B&B Team, Inc.
Inn Consultants and Brokers Since 1993
With Offices in Virginia and Maine
PETER SCHERMAN ~ P.O. Box 399, Scottsville, VA 24590
(434) 286-4600 ~ [email protected] Twitter PeterInVA
[/td][/tr][/table][/td][/tr][/table].

You didn't look closely enough...I already pasted it here..and I didn't look closely enough because Bree already posted the link to it

.

You didn't look closely enough...I already pasted it here..and I didn't look closely enough because Bree already posted the link to it

Oops! I just got it and didh't check, my bad!!
E

 

[JBloggs]

I wonder if the B&B Team are reading our forum? They just sent out an email about figuring out fair value for an inn. I'm going to try and paste it in here:
[tr][tr]The Basics of Inn Valuation: never, never forget!
by The B&B Team
As the years go by and we at The B&B Team do our work for current and aspiring innkeepers, there is one issue which never fails to perplex and which is so fundamentally important that we thought we should cover the topic again, briefly. That topic is about the basics of inn valuation.
If you own an inn or hope to some day, you need to have an exit strategy founded on sound principles. If the goal of an exit strategy is one day to sell your inn, you need to know what you will be selling and how the marketplace values it. Fundamentally there are two basic property types in the Innkeeping world: residential and commercial. Smaller B&B's are generally residential, and larger, viable inns and inn businesses are commercial. Each will be valued and financed differently.
Residential real estate is valued based on what the marketplace is willing to pay to live in a given house on a given street and is only limited by supply and demand. The result is that most smaller B&Bs, which are very desirable as homes and have limited income, are worth more as a residence than a business. In fact, they are generally only worth the sum of the real estate and the furnishings. Sellers of smaller B&B's should consider an exit strategy founded upon selling their wonderful home and hoping someone will take over the "business" even if they don't pay you for it. Like most small businesses, when you are done, you are most likely to close your doors and take down the sign, gratified in having enjoyed your Innkeeping experience.
On the other hand, owners of larger, viable inns must remember that buyers are looking for a business, not a house, and everything about their purchase and evaluation will hinge on revenue. Where the smaller inns can and should take advantage of every possible tax shelter, as this is a significant financial benefit of ownership, owners of larger inns should keep bottom line profits in mind as a priority over avoiding paying taxes.
Lenders will want to see three years' tax returns to verify income statements, so it's never too late to begin operating your business like a business. If that means you have to pay some taxes, so be it. Modest increases in net operating income can generate a ten-fold increase in value, dollar for dollar. The increase in value will far outstrip the short term benefits of the tax savings, so report all your earnings and don't pad your operating expenses with personal items. This excludes line items like depreciation, rent you pay yourself, interest expense, and other legitimate deductions.
If you remember these simple principles, you'll enjoy a far more swift and profitable exit when the time comes to move on to your next great adventure!
Click Here to Leave a Comment
[/td][/tr][/table][/td][/tr][tr][tr] [/td] [/td] [/td][/tr][/table][/td][/tr][tr][tr]

---

The B&B Team, Inc.
Inn Consultants and Brokers Since 1993
With Offices in Virginia and Maine
PETER SCHERMAN ~ P.O. Box 399, Scottsville, VA 24590
(434) 286-4600 ~ [email protected] Twitter PeterInVA
[/td][/tr][/table][/td][/tr][/table].

You didn't look closely enough...I already pasted it here..and I didn't look closely enough because Bree already posted the link to it

.

Yeah...this thread has either a dejavu or alztheimery feel to it.

.

Yeah...this thread has either a dejavu or alztheimery feel to it.

First you forget names, then you forget faces.
Then you forget to pull up your zipper. It's worse when you forget to pull it down..

 

[sunburst2]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined.

 

[swirt]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined..

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.

 

[Breakfast Diva]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined..

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.
.

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.

I think the appraiser does have the selling price because our appraisal we just got for our new house matched the exact purchase price. Because the appraiser used bad comps and he appraised it for the selling price, the bank felt that he had made too wide of an adjustment and questioned it. It was not until we got good comps from the real estate agents did the bank accept the appraisal.

 

[swirt]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined..

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.
.

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.

I think the appraiser does have the selling price because our appraisal we just got for our new house matched the exact purchase price. Because the appraiser used bad comps and he appraised it for the selling price, the bank felt that he had made too wide of an adjustment and questioned it. It was not until we got good comps from the real estate agents did the bank accept the appraisal.
.

I think the appraiser does have the selling price because our appraisal we just got for our new house matched the exact purchase price.
I think you are right, I think they do have the selling price. What I'm not sure they have is the amount being financed. In other words:
Buyer offers $500K
Bank is being asked to loan $300K
Appraiser says it is worth $400K
The bank is still happy because they are only putting up less than 80% of the value and the sale continues. I don't think (but not certain) that the appraiser knows how much was being financed.

 

[Breakfast Diva]

ahhhhhhh....I getcha!

 

[sunburst2]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined..

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.
.

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.

I think the appraiser does have the selling price because our appraisal we just got for our new house matched the exact purchase price. Because the appraiser used bad comps and he appraised it for the selling price, the bank felt that he had made too wide of an adjustment and questioned it. It was not until we got good comps from the real estate agents did the bank accept the appraisal.
.

I think the appraiser does have the selling price because our appraisal we just got for our new house matched the exact purchase price.
I think you are right, I think they do have the selling price. What I'm not sure they have is the amount being financed. In other words:
Buyer offers $500K
Bank is being asked to loan $300K
Appraiser says it is worth $400K
The bank is still happy because they are only putting up less than 80% of the value and the sale continues. I don't think (but not certain) that the appraiser knows how much was being financed.
.

Right, and in the scenario you suggest you also aren't stuck in a contract to pay more than appraised value if you made your offer to buy contingent on the appraisal being equal to the offered price. So, you and the bank can both be happy; maybe not the seller, but they could back out of selling at the new appraised price. Not a brilliant thing to do unless they wanted to keep running it themselves

 

[gillumhouse]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined..

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.
.

The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
THAT is a good thing. We went for a loan. The appraiser the bank assigned was ON THE BOARD OF THE BANK! Did he ever low-ball the value of this house (@ $12k more than we had paid 9 years earlier - after new windows, furnace, electrical, etc)!! 3 years later we wanted to refinance (the first one ended up being a line of credit and we decided a fixed was a better fit) and they sent the same guy. But NOW we had the extra bathroom upstairs and had renovated the original upstairs bathroom had done a few other things to improve and he only valued the house at $22 k more than he had earlier when he was supposed to apparaise as if the siding we wanted to do was done. His comparables were from a town across a mountain and in a different county (same county as bank but not us) and that town is nothing like ours.
It is about time that appraisers are not in the pockets of the banks.

 

[JBloggs]

BTW you do not need a college degree to be an appraiser, only upkeep on classes annually and an exam. I had two friends who were appraisers and pulled in $300-500 a pop for 5 minutes worth of work onsite. If it was a duplex they did the happy dance!
That was before digital cameras and the internet as their database, They had to develop film at an hour photo, use the microfiche and overnight the packet, so that plus gas was the total expense. I used to go on appraisels with them, three comps - one similar or close to, one higher than, one lower than.
Many times they require the homeowner to be absentee when they appraise and it is a walk in the park, many times they are vacant buildings. My close friend made $150k a year and the worst part about her job was driving from one to the next until she made her territory smaller.
I have considered doing this "as my next job" you are a private contractor and/or you can start out working for an appraisel company to get your foot in the door for a year so you can build banks as clients.

 

[swirt]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined..

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.
.

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.

I think the appraiser does have the selling price because our appraisal we just got for our new house matched the exact purchase price. Because the appraiser used bad comps and he appraised it for the selling price, the bank felt that he had made too wide of an adjustment and questioned it. It was not until we got good comps from the real estate agents did the bank accept the appraisal.
.

I think the appraiser does have the selling price because our appraisal we just got for our new house matched the exact purchase price.
I think you are right, I think they do have the selling price. What I'm not sure they have is the amount being financed. In other words:
Buyer offers $500K
Bank is being asked to loan $300K
Appraiser says it is worth $400K
The bank is still happy because they are only putting up less than 80% of the value and the sale continues. I don't think (but not certain) that the appraiser knows how much was being financed.
.

Right, and in the scenario you suggest you also aren't stuck in a contract to pay more than appraised value if you made your offer to buy contingent on the appraisal being equal to the offered price. So, you and the bank can both be happy; maybe not the seller, but they could back out of selling at the new appraised price. Not a brilliant thing to do unless they wanted to keep running it themselves
.

Right, and in the scenario you suggest you also aren't stuck in a contract to pay more than appraised value if you made your offer to buy contingent on the appraisal being equal to the offered price. So, you and the bank can both be happy; maybe not the seller, but they could back out of selling at the new appraised price. Not a brilliant thing to do unless they wanted to keep running it themselves

Except that the appraiser is not looking for fair market value....at this point they are pretty much looking at shit hits the fan value. There is no incentive for them to come even close to what would be considered fair market value. Their new goal is to protect the financial institutions as a whole, not the individual bank, not the seller and not the buyer.
Making an offer contingent on fianancing is wise. Making an offer contingent on structural inspection is wise. Making an offer based on appraisal is too little too late. A buyer needs to do the homework on the offer before the offer is made, not after the fact. An accepted offer removes the house from the market. A buyer shouldn't do that unless they actually intend to pay what they offered, provided that the bank is willing to back them up.

 

[wendydk]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined..

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.
.

The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
THAT is a good thing. We went for a loan. The appraiser the bank assigned was ON THE BOARD OF THE BANK! Did he ever low-ball the value of this house (@ $12k more than we had paid 9 years earlier - after new windows, furnace, electrical, etc)!! 3 years later we wanted to refinance (the first one ended up being a line of credit and we decided a fixed was a better fit) and they sent the same guy. But NOW we had the extra bathroom upstairs and had renovated the original upstairs bathroom had done a few other things to improve and he only valued the house at $22 k more than he had earlier when he was supposed to apparaise as if the siding we wanted to do was done. His comparables were from a town across a mountain and in a different county (same county as bank but not us) and that town is nothing like ours.
It is about time that appraisers are not in the pockets of the banks.
.

Kathleen
Did you get a residential or commerical refinance? We financed residential when we bought, but have not been able to refinance ever since the Inn opened. Because that sign is out there, they won't touch it because of business use of the home.....and I've contacted over 30 lenders and brokers.
Not big enough for commercial financing, and no one will touch us for residential financing, even though our credit is flawless, hubs is still at his 17 year full time job, and even I was working part-time last time we tried. I would have to take the sign down, and the nameplates off the guest room doors to get it done, I guess. Too stupid, when you consider that the business is making the mortgage payments and has paid for it's own extensive improvements.

 

[gillumhouse]

I wasn't going to jump into this thread again, but have to say the information from the B&B Team is great - B&B valuation 101 in a nutshell. And, the information that the bank probably won't take an appraisal you contract for before going for your loan also very likely. So, I suggest again to negotiate with the owner without any official appraisal. What are they going to do if you don't buy? Run it again themselves or find someone else again, like you, to run it for them! They are in a bit of a difficult position themselves. Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is. And, the bank is most concerned that the price upon which they are loaning you a percentage is not too high. In addition when you enter a contract to buy with the seller you make the contract contingent upon an appraisal equal to or greater than the agreed upon selling price. This will achieve the end of getting the best and the proper price determined..

Of course the bank has to have an appraisal, and when you go apply for a loan they will send their appraiser or one of their choice to do such. It's my experience that within the framework of their ethical standards appraisers are going to try to make their appraisal confirm what the already agreed upon selling price is.
That was yesterday's ballgame so to speak. The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
I'm not sure, but I think the appraiser may not even have access to the amount that is being requested in the loan. I think they have to make the appraisal blind from the financial requirements.
.

The new law of the land is that the bank gets assigned an appraiser (they don't pick one anymore) and they are not allowed to have any contact with the appraiser.
THAT is a good thing. We went for a loan. The appraiser the bank assigned was ON THE BOARD OF THE BANK! Did he ever low-ball the value of this house (@ $12k more than we had paid 9 years earlier - after new windows, furnace, electrical, etc)!! 3 years later we wanted to refinance (the first one ended up being a line of credit and we decided a fixed was a better fit) and they sent the same guy. But NOW we had the extra bathroom upstairs and had renovated the original upstairs bathroom had done a few other things to improve and he only valued the house at $22 k more than he had earlier when he was supposed to apparaise as if the siding we wanted to do was done. His comparables were from a town across a mountain and in a different county (same county as bank but not us) and that town is nothing like ours.
It is about time that appraisers are not in the pockets of the banks.
.

Kathleen
Did you get a residential or commerical refinance? We financed residential when we bought, but have not been able to refinance ever since the Inn opened. Because that sign is out there, they won't touch it because of business use of the home.....and I've contacted over 30 lenders and brokers.
Not big enough for commercial financing, and no one will touch us for residential financing, even though our credit is flawless, hubs is still at his 17 year full time job, and even I was working part-time last time we tried. I would have to take the sign down, and the nameplates off the guest room doors to get it done, I guess. Too stupid, when you consider that the business is making the mortgage payments and has paid for it's own extensive improvements.

.

Residential I guess. It is in the name of both of us and the house is the collateral - even though 2/3 of the house is listed on the tax rolls as commercial. Maybe it is considered a personal loan with collateral. I do have a business loan through SBA that I hope I can pay off before the interest rates go up again (but am not holding my breath on being able to do that).
I am hoping to sell quickly when I do put it on the market because I only want enough to pay of my bills and have enough for a nice downpayment on a small house in town. That is not much more total than a residence price - and I DO have good name recognition as a business. DH told me today he does not want to ever have to move. Nice of him to say that after hearing him complain about this house all these years!

 

[charlesjared]

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