Buying/selling an appraisal business--value?

[The Warrior Monk]

The business has been in operation for 17 years. Essentially I will be purchasing the office fixtures and client relations (such as they would still exist as so many accounts are established under the former owners name, license and resume.)

I have no idea what the size of the business you are purchasing is. If it's a small company, the clients are likely not going to be interested in you, unless they are already familiar with and like your work. If you're dealing with lenders and/or AMCs, and you aren't already on their lists, there's a good chance you may not be able to keep those clients. You're license level may be an issue if the company owner had a higher licensure level than you do.

Larger companies with many appraisers, especially firms that have specialties, may have much greater value.

 

[KeyWhiz]

Thanks for all the replies and advice! Here's is what has happened so far:

The other appraiser and I (both of us have been there about 4 years) who worked with the previous owner have agreed to purchase the LLC that controlled the appraisal business from the previous owner's widow in exchange for 5% of the gross receipts for 3 years with a minimum guarantee of $5000 to her annually. This includes all office equipment, software licenses, etc. In addition she will recieve 100% of any outstanding receivables from her husband's appraisals.

We will be meeting with an attorney this week to decide the best way to set up the business in our name that will allow us the keep as many of the clients as possible (same business name, same tax IDs, etc.) while protecting us from any potential liability from the previous owner's appraisals. Some one suggested buying tail coverage for his E&O but that sounds a bit overkill to me. Any suggestions along these lines?

Our biggest concern has been keeping as many of the clients as possible. We were individually approved with some, but not all of the clients. We are handling these on a as-come basis, and most have been willing to simply put our names on their list instead of his. So far there has only been one major client (Landsafe, which was about 15% of this year's business) that has been difficult. Telling us that we have to get individualy approved but, when trying to talk to the arm of the company who does the approving, that they aren't taking on any new appraisers at this time. Such is the difficulty of dealing with the big AMCs.

I'll keep everyone updated on how it goes in the future!

 

[Deadbusiness]

Legal Issues

I'm not as savvy about prior appraisals since I never bought a company that was somebody elses. Somebody on this forum may be more familiar. I would be scared about the appraisals performed by this company in the 5 years prior to the date you are purchasing the company as you may be at least partially on the hook for any future issues on these old reports. I'm not sure what your liability may be but if some appraisals need defending you may have to step up especially if the former appraisers of those reports are not available or practicing anymore. This may be a little risky since the 5 prior years to your purchase is during the collapse period. You may have a few ticking time bombs in your file cabinet that you are not currently aware of. You may have to defend some frivilous suits as well as legitamate ones. When things go bad, people are always looking to sue somebody for their own poor choices. Good luck.

 

[JT1974]

Adam,

You share a striking resemblence with my good buddy Bahny Fwank.