Business personal property Valuation

Business Personal Property (BPP) may be difficult to assess because of the limited amount of data available and focused mainly on the sales comparison approach. Relatively speaking, a huge amount of data is available when assessing real estate as opposed to valuing business personal property. Many real estate appraisals would take into account three approaches to value: cost approach, sales comparison approach and income approach. However, most assessments of the business personal property depend mainly on the comparison approach. Although it is achievable to formulate a reasonable estimate of the market value for business personal property, the values incline to be more subjective than the value of real estate.

Sales comparison method depends on the principles of substitution and supply and demand. Buyers of business personal property will look for alternatives and prefer the most advantageous alternative for them considering the price, quantity and quality. For real estate, sales comparable data is available with detailed descriptions of properties, including the quantity and quality. For business personal property is more complicated to obtain precise information on the quantity and quality of properties that are involved in a sale. For example, assume XYZ Company recently closed its operations in Chicago and sold furniture, phone system, network servers, PCs and related components for an office with 30,000 square feet of space and 120 employees. The sales data includes the amount of desks, chairs, filing cabinets, personal computers, network computers, etc. But it does not contain exact information about the condition and age of each of these articles. Real estate is more stable and easier to depict versus the sale of a quantity of business personal property.

Mostly real estate appraisers arrive at a perception from preparing each of the three approaches to value for real estate assignments. Notwithstanding, personal property appraisers usually focus primarily on the sales comparison approach. They do not have the advantage of contrasting the value conclusion through the sales comparison approach with values using the cost approach and income approach.

It is important to define the assets must be valued. The reference to our example of XYZ, which closed its office, the task is to assign a value to each item as if it will be sold separately or is it to assign a value to the entire collection of furniture, computers and equipment? An alternative approach would be to determine a value based on sales of subsets of the whole. For example. Furniture to one buyer, and the computers and the telephone network to another buyer.

The definition of value also has a significant impact on the conclusion of value. The market value is generally defined as the value provided by the buyer and seller are informed about the property, neither the buyer nor seller is under pain to buy or sell, and an appropriate amount of time allowed to market the property. A liquidation value would also assume that the buyer and seller are informed about the assets. But it would take a very short time to sell the property. Value in use gives the description to the value of assets at the current owner. It does not reflect what would likely be third pay to buy the assets.

In addition to executing an appraisal to assess the market value of business personal property, other techniques that are occasionally considered for evaluating business personal property are depreciation schedules of IRS and appraisal district depreciation schedules. These may or may not lead to a conclusion value that reflects the market value. However, it is the writer's experience that they usually give a value greater than the actual market value.

The appraisal division of O’Connor & Associates is a national provider of commercial real estate appraisal services including real estate consulting, casualty loss appraisals, cost segregation studies, due diligence, insurance valuations, feasibility studies, financial modeling, gift tax valuations, highest and best use analyses, casualty loss valuations and HUD map market studies.