When there is a need to know the value of your business or ownership in a private company, real or personal property, or intangible assets, the answer should come from a qualified certified or licensed appraiser. Should you, as a business or asset owner, choose the first person you meet or the person offering the lowest price to give you a value for your business, property, and/or assets?  

An appraisal is an independent, unbiased opinion of value given by a qualified, certified or licensed appraiser with the experience and competence to form a credible opinion of value.

So how does a company choose the right appraiser for their needs?  

Purpose:

The first thing a company needs to know before trying to hire an appraiser is the purpose of the project. Is the business or asset owner's intended use of the appraisal:

  • Insurance Placement or Recovery?
  • Property Tax disputes?
  • Shareholder Disputes?
  • Business or Marital Divorce?
  • Gift or Estate Tax Purposes?
  • Selling or investing or expanding the company?
  • Dissolution of the Business?
  • Succession Planning?

Once you know the why, it is time to choose who is the best individual or firm to fulfill your appraisal needs.  

Qualified and Certified:

The Uniform Standards of Professional Appraisal Practice (USPAP) defines an appraiser as "one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective." The Internal Revenue Service (IRS) requires an appraiser to be "Qualified" meaning the Appraiser must perform appraisals similar to the subject assignment as his/her primary vocation, regardless of certification or licensure (including CPA).

Appraisers are licensed and/or certified for specific disciplines, so a company needs to find one that suits its purposes. The appraiser you hire should be familiar with the type of property you want appraised, how to value it correctly, and be properly certified or licensed to perform the assignment. Remember, "Certified" or "Licensed" does not necessarily mean "Qualified;" however, a "Qualified" appraiser should be certified or licensed depending upon the appraisal discipline and purpose. 

Interview:

When interviewing potential appraisers, you want to ensure that they are qualified to complete your assignment.

  • Ask for a resume with references and verify the experience listed.
  • Ask for samples of work they have performed in the recent past that can prove their competency and knowledge of the industry.
  • Question him or her on the methods they would use to determine the value of what is being appraised.
  • Seek out appraisers who are willing to take the time up front to help you understand key valuation concepts and considerations.
  • Pay close attention to what questions he or she is asking regarding the assignment. It is ultimately the decision of the appraiser as to the scope of work, methods for computing value, and the estimation on the final opinion of value. He or she should also be guiding the client on how to proceed. If he or she is not asking the right questions up front, this should send up a red flag that he or she may not be the right person for the job.

Disclosure:

An appraiser must offer full disclosure. This includes:

  • Lack of knowledge as to the assignment's subject;
  • Whether or not the appraiser has provided any services regarding the subject asset or business in the last three (3) years, or
  • Any interest he or she may have in the subject.

An appraisal is supposed to be objective; full disclosure allows the potential client to determine if there is a conflict of interest to choose a different appraiser.

Other important things to consider include:

  • The appraiser's experience with litigation. Litigation is always a possibility. Your appraiser should be willing to provide litigation support and be available for conferences or consulting. He or she should also be able to defend their work, if necessary, in a court of law.

The appraiser's fee basis. Appraisers should quote a flat fee, hourly fee, or per item fee. It is a violation of the USPAP code of ethics for an appraiser to charge a contingency fee based on the final opinion of value.