Don’t just order an appraisal, its not a loaf of bread…get what you need.

It frequently amazes me how people doing workouts including lawyers, fail to understand the art and skill in hiring and managing an appraiser, so you get the results you want. Yes managing the process not just hiring and waiting for the results. An appraisal is vitally important and getting the right number is obviously crucial to achieving the deal you want. You cannot leave it to luck, the process must be managed.

There are a number of factors in play, the first being the understanding that while an appraisal is based on comps, there is a range of possibilities all of which are reasonable and true. Left to his own, the appraiser will do whatever he thinks is best. Managed he will deliver the results you need. Its not about fixing the deal, its about fine tuning the results within industry standards to yield the results must beneficial to your client but still within reason.

For example, there is a huge difference between the high end of possibilities and the low end, so there is always a range that the property falls within. If the appraiser does not know what you are looking for or trying to achieve how can he deliver the best results?

Second there is the issue of liquidation value vs. market value, a huge difference but both relevant, however if liquidation value is what you really want, I have seen many liquidation situations fail because the appraiser did a market value appraisal. Tell the appraiser and his standards change dramatically as do the results. It’s all appropriate as he will explain his results and the standards used in his appraisal as being a liquidation appraisal. However if not explained it may be done as a normal appraisal with results that will not properly reflect a liquidation situation and thus could destroy a deal.

In many instances I have asked the appraiser to go back and find additional comps that delivers a better result and in many instances it can be done.

There are many times a bank wants to do the appraisal and we will have an opportunity to provide information relevant to producing the results we want if the appraiser is spoken to and information provided to support your best interests even if its the banks appraiser.

Sometimes we provide an additional appraisal just to manage the banks appraisal to provide an additional point of view.

Recently I was negotiating a workout for a hotel  that the bank appraised for $1.3 million. Our appraiser came up with $800,000. That’s a huge spread and the result was the bank had to send both appraisals to a third appraiser to reconcile, which guaranteed a win for me as there was bound to be a compromise between the two. However despite the existence of the high bank appraisal we produced an offer based on our low one and it was deemed acceptable because we had an appraisal that supported what we offered, despite the huge spread.

Lawyers do not typically manage the process, banks do, however I play the appraiser like a fine instrument always getting what is needed to produce the deal we want. It is most important and so few understand the value and potential of effectively managing an appraiser. I may interview two or three appraisers before I select one, its vitally important to get the right man to do the job.

Try it out, it works. Call me if you need help. 413-549-2966, Norm will set you up with a no obligation teleconference with me as soon as possible.