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90 day liquidation value

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MNRural

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Member
Joined
Oct 11, 2006
Professional Status
Certified General Appraiser
State
Minnesota
Client also wants 90 day liquidation value.

10 'detached townhome' sites, small rural community, a five year absorption period after a two year holding period while none sell. All discounted via dcf to estimate market value.

Any advice or data sources on further discounting to estimate a 90 day liquidation value?
 

Lost Cause

Senior Member
Joined
Sep 17, 2004
Professional Status
Certified General Appraiser
State
New York
Client also wants 90 day liquidation value.

10 'detached townhome' sites, small rural community, a five year absorption period after a two year holding period while none sell. All discounted via dcf to estimate market value.

Any advice or data sources on further discounting to estimate a 90 day liquidation value?
If the projection is that none will sell in two years, it looks a lot like the 90-day liquidation value is about nada (or perhaps less).
 

PL1957

Senior Member
Joined
Jul 19, 2004
Professional Status
Certified General Appraiser
State
Illinois
If the projection is that none will sell in two years, it looks a lot like the 90-day liquidation value is about nada (or perhaps less).
The only way to support something like that is with extensive interviews with market participants about what kind of discount would be demanded to meet the 90 day sale period.
 

Stephen J. Vertin MAI

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Illinois
Paul: I have a Wellsfargo format if you believe it would help. E-mail me at [email protected]. Best thing to do is interview brokers. Get a couple opinions, explain what you did and crunch the numbers. I do them all the time and this method seems to work best.
 

Stephen J. Vertin MAI

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Illinois
PL, you and I posted almost the same response at the same time.
 

H.B. Userman

Junior Member
Joined
Nov 11, 2003
Professional Status
Certified General Appraiser
State
Wisconsin
In my last assignment that required liquidation discounts, I emailed several brokers that specialize in the property type & market. I posted three quick multiple choice questions, and all four returned the questionaire. I described the bldg characteristics and market area, and asked A) What is the normal marketing time B) What discount would apply for a 12 month marketing time? C)6 month marketing. The answers were the choice of 10-20%, 20-30%, 30-40%, 40-50%.

Of course, depending on the market area and property type, the discount ranges that are given as a choice depends. In my assignment, it was for an industrial building in a fairly stable owner-occupied market. I would think that a subdivision would warrant higher discounts, and you'd want to give the broker/buyer a few more options to chose from.

Some of the brokers checked more than one answer. But when all feedback was received, it provided good support for my conclusions.
 

JT1974

Senior Member
Joined
Dec 16, 2006
Professional Status
Certified General Appraiser
State
Wisconsin
Whenever I give a liquidation value I interview market participants and include their comments in the report along with their contact information. I figure that way the banks can call the people who I interviewed to verify what I included in the report if they choose to.

I just figure it's much better to name names rather than say "based on interviews with market participants".

What's everyone else's take on this approach? PL? Mr. Vertin?
 

Scott Lanz

Member
Joined
Dec 13, 2002
Professional Status
Certified General Appraiser
State
Minnesota
Ditto the above posters.
 

PL1957

Senior Member
Joined
Jul 19, 2004
Professional Status
Certified General Appraiser
State
Illinois
I just figure it's much better to name names rather than say "based on interviews with market participants".
I won't name names unless I have to, and only with the "names" permission, because I don't want to hang my contacts out to dry. Not only would they be subject to review appraisers, loan officers and property owners calling them to dispute their opinion of discount, it could also come back to bite them if an owner or foreclosing lender decides to market the property.
 

Stephen J. Vertin MAI

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Illinois
I would agree with PL, if your client does not trust what you say he should get another appraiser. There is no reason to hand out phone numbers. Having a second or third call on an issue, sets off alarms for most. Why subject your contacts when not necessary.
 
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